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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 December 31, 1994
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-8564
SYMS CORP
(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
(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. [ ]
The aggregate market value of the voting stock of the registrant held by
non-affiliates on March 2, 1995 was $34,948,774 based upon the closing price of
such stock on that date.
As of March 2, 1995 17,694,015 shares of Common Stock were outstanding.
Portions of the registrant's Proxy Statement for the annual meeting to be
held on May 12, 1995 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 39 "off-price" apparel 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 39 stores and the aggregate amount of selling space in the Syms
stores increased from approximately 2,000 square feet to approximately 1,486,000
square feet. In March 1987, the Company relocated to an approximately 275,000
square foot distribution center and executive headquarters. Syms Corp was
incorporated in New Jersey on July 11, 1983. On July 25, 1983, a reorganization
was effected pursuant to which Syms Inc. and a newly formed corporation, Syms
Advertising, Inc., became wholly owned subsidiaries of Syms Corp Syms
Advertising Agency, a sole proprietorship owned by Sy Syms, was transferred to
Syms Advertising Inc. On December 31, 1985, Syms Inc. was merged into Syms Corp
Syms Inc. was the principal retailing subsidiary of Syms Corp and the
operations previously conducted by Syms Inc. are now being conducted by Syms
Corp.
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 39 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 and children's
apparel. 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 December 31, 1994 net sales were generated by the
following categories:
Men's tailored clothes and haberdashery ............ 54%
Women's dresses, suits, separates and accessories... 29%
Shoes .............................................. 8%
Children's wear .................................... 6%
Luggage, domestics and fragrances .................. 3%
---
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
500 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 the Vice
President-General Merchandise Manager and after consultation with store
managers.
1
Distribution
The Company owns a distribution center, located at Syms Way, Secaucus, New
Jersey, which facility contains approximately 237,000 square feet of warehouse
and distribution space, 38,000 square feet of office space and 25,000 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 283 years. Most
merchandise is received from manufacturers at the distribution center where it
is inspected, ticketed and allocated to particular stores.
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 sales 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. The Company also offers "dividend" prices consisting of
additional price reductions on various types of merchandise.
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 in all of its markets as well
as direct mail to its Syms credit card customer base. The Company has realized a
positive impact in the fourth quarter, and will continue the strategy in 1995.
Syms advertising has as its theme "At Syms, An Educated Consumer is Our Best
Customer." 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 or store merchandise
credits which may be used toward the purchase of other merchandise.
Trademarks
"Syms", "An Educated Consumer is Our Best Customer" and "The More You Know
About Clothing the Better it is for Syms" 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 435 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.
2
Employees
At December 31, 1994, the Company had 2,364 employees of whom approximately
753 work part time. Collective bargaining agreements cover 1,362 sales and
tailor employees. Approximately 40 to 120 persons, consisting mostly of sales
personnel, are employed at each Syms store.
Item 2. PROPERTIES
The Stores
Location
The Company has 39 stores, eighteen 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.
Approximate Approximate
Selling Selling
Space at Space at
Owned Stores December 31, Leased Stores December 31,
Location 1994 (sq. ft.) Location 1994 (sq. ft.)
- - -------- ------------- -------- -------------
New York City, New York 40,000 Elmsford, New York 50,000
Westbury, Long Island 72,000 Woodbridge, New Jersey 32,000
Commack, Long Island 36,000 Hartford, Connecticut 31,000
Buffalo, New York 39,000 Providence, Rhode Island 27,000
Rochester, New York 32,000 Norwood, Massachusetts 36,000
Paramus, New Jersey 56,000 Peabody, Massachusetts 39,000
Secaucus, New Jersey 25,000 Franklin Mills, Pennsylvania 22,000
Cherry Hill, New Jersey 40,000 Falls Church, Virginia 28,000
Fairfield, Connecticut 22,000 Potomac Mills, Virginia 33,000
King of Prussia, Pennsylvania 41,000 Rockville, Maryland 56,000
Pittsburgh, Pennsylvania 31,000 Baltimore, Maryland 43,000
Fort Lauderdale, Florida 44,000 West Palm Beach, Florida 36,000
Miami, Florida 45,000 Hoffman Estates, Illinois 31,000
Tampa, Florida 38,000 Gurnee Mills, Illinois 33,000
Addison, Illinois 47,000 Niles, Illinois 32,000
Atlanta, Georgia 51,000 Sterling Heights, Michigan 35,000
Southfield, Michigan 46,000 St. Louis, Missouri 33,000
Dallas, Texas 42,000 Charlotte, North Carolina 30,000
Hurst, Texas 38,000 -------
Houston, Texas 34,000
Cleveland, Ohio 40,000
------
Total Owned Space 859,000 Total Leased Space 627,000
======= =======
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
New York City store. Syms stores are usually located near a major highway or
thoroughfare in suburban areas populated by at least one million people and are
readily accessible to customers by automobile. In certain areas where there is a
population in excess of two million people, Syms has opened more than one store
in the same general vicinity.
Lease Terms
Seventeen of the Company's thirty-nine stores are currently leased from
unrelated parties, and the Elmsford, New York store is leased from Sy Syms. The
following table summarizes lease expirations and any renewal options:
3
Range
Number of Number of in Years
Calendar Leases Leases with Renewal of Option
Periods Expiring Options Periods (1)
- - -------- -------- ------------------- ----------
1995 - - -
1996 1 1 5
1997 2 1 5
1998 4 4 4-5
1999 3 1 5
2000 and thereafter 8 5 5
-- --
18 12
== ==
(1) 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 $2.50 and
$10.75 per square foot. In addition, under the "net, net, net" terms of all of
the leases, the Company must also pay maintenance expenses, real estate taxes
and other charges. Five 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 $4,030,000 for the year ended December 31, 1994, of which $600,000
was paid to Sy Syms as fixed rental.
New Store Sites
During 1994, the Company opened new stores in Commack, Long Island;
Hartford, Connecticut; Fairfield, Connecticut; Providence, Rhode Island and
Hurst, Texas.
Item 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending against the Company.
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 report.
4
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
Market Information
On September 23, 1983, the Company's Common Stock commenced trading on the
New York Stock Exchange under the symbol SYM. Prior to that time, there was no
public market for the Company's Common Stock. The high and low quarterly sales
prices for the Common Stock during each quarter of the last two years and for
the first quarter of 1995 are as follows:
1993 First Quarter......................... 11 1/2 9 1/8
Second Quarter........................ 10 5/8 9
Third Quarter......................... 10 9 1/4
Fourth Quarter........................ 11 1/2 9 3/8
1994 First Quarter......................... 10 1/4 8 1/4
Second Quarter........................ 8 3/4 7 1/2
Third Quarter......................... 8 3/8 7 1/2
Fourth Quarter........................ 8 7/8 6 3/8
1995 First Quarter (through 3/2/95) ....... 7 6 1/2
Holders
As of March 2, 1995 there were 277 record holders of the Company's
Common Stock. The Company believes that there are in excess of 1,650 beneficial
owners of the Company's Common Stock as of that date.
Dividends
The Company paid dividends of five cents per share on January 3, 1994, May
2, 1994 and August 1, 1994 to shareholders of record on December 3, 1994, April
4, 1994 and July 1, 1994, respectively. The Board elected not to declare
dividends in the third and fourth quarters of 1994. Prior to the above mentioned
dividends, the Company had not paid cash dividends on its Common Stock since its
1983 initial public offering. Payment of dividends is within the discretion of
the Company's Board of Directors and will depend upon various factors including
the earnings, capital requirements and financial condition of the Company (see
Note 5 to the consolidated financial statements regarding covenants in the
Company's revolving credit agreement).
5
Item 6. SELECTED FINANCIAL DATA
Fiscal Year Ended (A)
---------------------------------------------------------------
December 29, December 28, January 2, January 1, December 31,
1990 1991 1993 1994 1994
----------- ------------ ---------- ---------- ------------
Income statement data
Net Sales ................. $314,430 $317,500 $319,623 $318,939 $326,651
======== ======== ======== ======== ========
Net Income ................ $ 14,111 $ 14,261 $ 15,148 $ 10,847 $ 8,491
======== ======== ======== ======== ========
Earnings per share ........ $ .80 .81 .86 .61 .48
======== ======== ======== ======== ========
Weighted Average
Shares Outstanding ........ 17,677 17,682 17,690 17,690 17,693
======== ======== ======== ======== ========
Cash Dividend Per Share ... $ -- $ -- $ -- $ .05 $ .10
======== ======== ======== ======== ========
Balance sheet data:
Working Capital ........... $ 44,392 $ 51,972 $ 61,338 $ 59,871 $ 59,918
Total Assets .............. 198,343 199,211 204,071 221,152 245,385
Long Term debt and
capitalized leases (B) .. 12,594 7,010 2,209 1,974 1,696
Shareholders' equity ...... 151,109 165,477 180,625 190,605 197,341
- - -----------------------------------
(A) The following are the closing dates for all years presented: December 29,
1990, December 28, 1991, January 2, 1993, January 1, 1994 and December 31,
1994.
(B) Excludes current maturities.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company maintains its records on the basis of a 52-53 week fiscal year
ending the Saturday closest to December 31. The following discussion compares
the fiscal year ended December 31, 1994 with the fiscal years ended January 1,
1994 and January 2, 1993. Fiscal years 1994 and 1993 were comprised of 52 weeks.
The fiscal year ended January 2, 1993 was comprised of 53 weeks.
Results of Operations
Fiscal Years Ended January 2, 1993, January 1, 1994 and December 31, 1994
In 1994, net sales were $326,651,000, an increase of $7,712,000 or 2.4%
from 1993. The increase was a result of an increase in net sales in the amount
of $31,803,000 for stores opened in 1993 and 1994, offset by a decrease of
$24,091,000 or 7.8% for comparable store net sales.
In 1993, net sales decreased to $318,939,000 from $319,623,000 in 1992, a
decrease of $684,000 or .2%. The decrease was attributable to a decrease in
comparable store net sales of $15,598,000 or 4.9%, which was offset by a full
year of operations for one store which opened in 1992 and the addition of five
new stores in 1993. Net sales attributable to non-comparable stores totaled
$14,914,000 or 4.7%. The total sales change on an equivalent fifty-two week
basis would result in a decrease in comparable store net sales of $10,086,000 or
3.3%.
In 1994, the Company's gross margin increased to 33.3% from 32.4% in 1993.
The increase was the result of a higher initial markup partially offset by
additional markdowns. As discussed in Note 1D to the financial statements, the
Company changed its method of valuing the inventory at December 31, 1994. The
change in valuation resulted in a $780,000 increase to the gross margin. In
1993, the Company's gross margin decreased to 32.4% from 32.9%. This decrease
was the result of a lower initial markup and a decrease in vendor anticipation.
The Company estimates interim gross margin based principally upon
historical experience. The determination of cost of sales for the fiscal year is
based on a physical inventory at the end of such year. Using estimated gross
margins for the first three quarters has resulted in upward adjustments to gross
margin in the fourth quarter for the last several years. In 1994 the adjustment
was due primarily to a higher initial markup. In 1993 the adjustment was less
significant than in prior years, but still resulted in an upward adjustment in
gross margin for the fourth quarter. The 1993
6
adjustment was primarily the result of lower markdowns than planned. These
adjustments resulted in an increase to gross profit of approximately $1,787,000
and $938,000 for the fourth quarters ended December 31, 1994 and January 1,
1994, respectively. Beginning in fiscal 1995, Syms is utilizing the retail
inventory method for quarterly inventory valuation.
As a percentage of net sales, operating, general and administrative
expenses (excluding occupancy, depreciation and amortization) were 22.5% in
1994, 21.2% in 1993 and 19.7% in 1992. The increase in the 1994 fiscal year
operating, general and administrative expenses (excluding occupancy,
depreciation and amortization) was principally due to a full year of expenses
related to the opening of five new stores in 1993, five new stores in 1994 and
the decrease in comparable store sales. Generally, the percent to sales of
operating, general and administrative expenses are higher for recently opened
stores. The increase in the 1993 fiscal period operating, general and
administrative expenses as a percentage of net sales was principally due to a
full year of expenses related to the opening of one new store in 1992, five new
stores in 1993 and a decrease in comparable store net sales.
Comparable store operating, general and administrative expenses decreased
by $2,720,000 or 4.2% primarily due to a reduction in payroll and advertising
costs. Overall operating, general and administrative expenses increased by
$5,927,000 or 8.8% from the 1993 fiscal period to the 1994 fiscal period due to
the opening of new stores, and by $4,551,000 or 7.2% from the 1992 to 1993
fiscal periods.
As a percentage of net sales, occupancy expenses were 3.7% in 1994, 3.0% in
1993 and 2.8% in 1992. In the 1994 fiscal period, occupancy expense increased as
a percentage to net sales principally due to a full year of expenses
attributable to the opening of five new stores in 1993, five new stores in 1994
and a decrease in comparable store net sales. The new stores primarily have been
under leasing arrangements. In the 1993 fiscal period, occupancy expenses
increased as a percentage of net sales principally due to a full year of
expenses attributable to the opening of one new store in 1992, five new stores
in 1993 and a decrease in comparable store net sales.
Income before the provision for income taxes was 4.4% in 1994, 6.0% in 1993
and 7.9% in 1992. The decrease in income before the provision for income taxes
in 1994 was due to a decrease in comparable store net sales and an overall
increase in operating, general and administrative expenses as well as occupancy
expenses and depreciation and amortization. These increases are primarily due to
the costs associated with opening five new stores in 1993 and five new stores in
1994. The decrease in income before provision for income taxes as a percentage
of net sales in 1993 from the preceding fiscal period was due to a decrease in
the gross margin and in comparable store net sales.
In 1994 the effective income tax rate decreased to 40.9% from 43.2% in
1993. The decrease in the effective rate was attributable to a decrease in
certain nondeductible expenses as well as state income taxes. In 1993, the
effective income tax rate increased to 43.2% from 39.8% in 1992. This increase
in the effective income tax rate was attributable to an increase in the
Statutory Federal income tax rate, an increase in certain non-tax deductible
expenses and the implementation of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes".
One new store is planned for 1995. The Company continues to evaluate its
markets and will consider opening new stores where it will be profitable by
taking advantage of existing advertising and other fixed expenses as well as
market conditions.
In February of 1995 the Company decided to close the store located in
Hoffman Estates, Illinois. The store had been opened in September of 1993 and
had not reached the Company's expected goals. The store accounted for less than
1% of sales in 1994.
Liquidity and Capital Resources
Working capital at December 31, 1994 was $59,918,000, an increase of
$47,000 from January 1, 1994. The ratio of current assets to current liabilities
was 2.3 at December 31, 1994, 3.2 at January 1, 1994 and 4.2 at January 2, 1993.
Net cash provided by operating activities totaled $12,936,000 in 1994
compared to $12,297,000 in 1993. Net income for 1994 amounted to $8,491,000
compared to $10,847,000 in 1993, a decrease of $2,356,000. In 1994 merchandise
inventories increased by $17,389,000 and accounts payable increased $8,535,000
primarily due to the addition of five new stores opened during 1994.
Net cash provided by operating activities was $12,297,000 in 1993 compared
to $17,979,000 in 1992. This decrease in cash provided by operating activities
was the result of a decrease in net income and a decrease in merchandise
inventories, partially offset by an increase in accounts payable.
7
Net cash used in investing activities was $14,488,000 in 1994 compared to
$12,178,000 in 1993. Expenditures for property and equipment totaled $14,591,000
and $17,508,000 for the years ended 1994 and 1993, respectively. In addition the
Company redeemed marketable securities during 1993 totaling $5,300,000.
Net cash used in investing activities was $12,178,000 in 1993 compared to
$11,945,000 in 1992. Expenditures for property and equipment totaled $17,508,000
and $6,713,000 for the years ended 1993 and 1992, respectively. In addition, the
Company purchased marketable securities during 1992 totaling $5,400,000.
Net cash provided by financing activities was $911,000 in 1994. Net cash
used in financing activities was $1,065,000 and $4,882,000 in 1993 and 1992
respectively. The Company paid cash dividends of $.10 per share in 1994, which
totaled $1,769,000. The Company had net borrowings of $2,900,000 in 1994. In
1993, the Company paid cash dividends of $.05 per share, which totaled $885,000.
During 1993 the Company renegotiated its revolving credit agreement with a
bank for a line of credit not to exceed $40,000,000 through December 1, 1997.
Except for this financing the Company has satisfied its operating and capital
expenditure requirements, including those for the opening and expansion of
stores, from internally generated funds. For the fiscal year ended December 31,
1994, the maximum amount of borrowings allowed under the revolving credit
agreement was $40,000,000, and the average amount of such borrowings was
$6,800,000 with the weighted average interest rate of 5.2%. For the fiscal year
ended January 1, 1994, the maximum amount of borrowings allowed under the
revolving credit agreement was $40,000,000, and the average amount of such
borrowings was $7,300,000 with the weighted average interest rate of 4.0%.
The Company has planned capital expenditures of approximately $10,000,000
for fiscal year 1995 which includes plans to open one store.
Management believes that existing resources, internally generated funds and
funds available from the revolving credit agreement will be sufficient for
future working capital and capital expenditure requirements.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements are filed together with
this 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.
8
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as follows (5):
Name Age Title
---- --- -----
Sy Syms(1)(2) ................................ 68 Chairman of the Board, Chief
Executive Officer and
Director of the Company
Marcy Syms(1)................................ 44 President, Chief Operating
Officer and Director of the
Company
Arthur Weber(5).............................. 48 Vice President - Finance,
Chief Financial Officer,
Treasurer and Director of the Company
Wilbur L. Ross, Jr.(2)(3)(4) ................ 57 Director of the Company
Harvey Weinberg(2)(3)(4) .................... 57 Director of the Company
- - ---------------------------
(1) Member of the Executive Committee of the Company.
(2) Member of the Compensation Committee of the Company.
(3) Member of the Audit Committee of the Company.
(4) Member of the Stock Option Committee of the Company.
(5) William E. Pattberg resigned as Vice President - Information Systems
effective January 20, 1995.
Arthur Weber has resigned as an Officer and Director effective
March 24, 1995.
The following officers are significant employees of the Company:
Name Age Title
---- --- -----
Stephen A. Merns.............................. 42 Vice President,
Secretary and Merchandise
Manager Mens Tailored Clothing
Ronald Zindman................................ 45 Vice President -
General Merchandise
Manager Ladies, Mens and Haberdashery
The officers and directors of Syms Advertising Inc. are: Sy Syms - Chairman
of the Board, Chief Executive Officer and Director; Marcy Syms - President,
Chief Operating Officer and Director and Stephen A. Merns - Secretary.
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 and Stephen A.
Merns are the children 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:
SY SYMS has been Chairman of the Board, Chief Executive Officer and a
director of the Company and/or its predecessors since 1959 and of Syms Inc. from
1959 through 1985. Mr. Sy Syms was Chief Operating Officer of the Company from
1983 to 1984.
MARCY SYMS has been President and a director of the Company since 1983 and
Chief Operating Officer of the Company since 1984. Ms. Marcy Syms was President
and a director of Syms Inc. from 1983 through 1985 and an officer and director
of Syms Inc. from 1978 through 1985. She is a Director of Midlantic Bank.
ARTHUR WEBER has been a Vice President, Chief Financial Officer, and
Treasurer of the Company since March 7, 1994 and a director of the Company since
March 18, 1994. Mr. Weber was Vice President of Finance and
9
Administration of Kids R Us from 1983 to 1992 and a consultant during 1993. Mr.
Weber has resigned as an Officer and Director of the Company effective March 24,
1995.
WILBUR L. ROSS, JR. has been a Managing Director of Rothschild Inc. since
1976. From 1971 to 1976, Mr. Ross was President of Faulkner Dawkins & Sullivan
Securities Corp. He is a member of the Board of Directors of Mego Corp. and GEO
International Corp. He has been a director of the Company since 1983.
HARVEY 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 served as Chairman of the Board of
Hartmarx Corporation. He has been a Director of the Company since December 1992.
STEPHEN A. MERNS has been Vice President, Secretary and Merchandise Manager
Mens Tailored Clothing of the Company since January 1, 1986. Mr. Stephen A.
Merns was Vice President and a buyer of men's haberdashery of Syms Inc. from
1980 through 1985 and Secretary of Syms Inc. from 1983 through 1985.
RONALD ZINDMAN has been Vice President - General Merchandise Manager
Ladies, Men's and Haberdashery since July 10, 1994. Previously, Mr. Zindman was
Vice President - General Merchandise Manager Ladies from March 1993 to July
1994.
Mr. Weber was late in the filing of a Form 3 Report required under the
Securities Exchange Act of 1934. No transactions were reportable in the late
report.
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 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, which the Company will file not later
than 120 days after December 31 1994, the end of the fiscal year covered by this
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 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, which the Company will file not later
than 120 days after December 31, 1994, the end of the fiscal year covered by
this 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 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, which the Company will file not later
than 120 days after December 31, 1994, the end of the fiscal year covered by
this Report.
10
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
PAGE NUMBER
(a)(1) Financial Statements:
Independent Auditors' Report............................... 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................. F6-F13
Supplementary Financial Information: Unaudited Selected
Quarterly Financial Data.................................. F-14
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 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-I 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 or Form-10K 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
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
9.1 Voting Trust Agreement, dated July 25, 1983
9.2 Supplemental Agreement and Amendment to Voting Trust Agreement, dated as
of December 15, 1994 (Exhibit 9.1 to Form 8-K dated December 15, 1994)
10.3 Leased Premises: Elmsford (White Plains), New York
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).
11
+10.21 Syms Corp 1983 Incentive Stock Option Plan as Amended (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 United Jersey Bank (8-K Report dated December 7, 1993)
*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 December 31, 1994 a Report on Form 8-K dated
December 15, 1994 was filed, reporting (under Item 5) an amendment to
the Voting Trust Agreement among Sy Syms and members of his family to
provide for the termination of the Voting Trust by December 31, 1996.
12
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
By /s/ SY SYMS
---------------
Sy Syms
Chairman of the Board
Date: March 17, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
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
- - --------- ----- ----
/s/ SY SYMS
- - ---------------------- Chairman of the Board March 17, 1995
Sy Syms and Director
(principal executive officer)
/s/ MARCY SYMS
- - ---------------------- President and Director March 17, 1995
Marcy Syms
/s/ ARTHUR WEBER
- - ---------------------- Vice President - Finance, March 17, 1995
Arthur Weber Treasurer and Director
(principal financial and
accounting officer)
/s/ WILBUR L. ROSS, JR.
- - ---------------------- Director March 17, 1995
Wilbur L. Ross, Jr.
/s/ HARVEY WEINBERG
- - -------------------- Director March 17, 1995
Harvey Weinberg
13
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Syms Corp
Secaucus, New Jersey
We have audited the accompanying consolidated balance sheets of Syms Corp and
its subsidiaries as of January 1, 1994 and December 31, 1994, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three fiscal years in the period ended December 31, 1994. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated 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
January 1, 1994 and December 31, 1994 and the results of their operations and
their cash flows for each of the three fiscal years in the period ended December
31, 1994 in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in fiscal 1993
the Company changed its method of accounting for income taxes to conform with
Statement of Financial Accounting Standards No. 109.
Deloitte & Touche, LLP
New York, New York
February 24, 1995
F-1
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
January 1, December 31,
ASSETS 1994 1994
- - ------ ---------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 1,347 $ 706
Merchandise inventories (Note 1) 79,418 96,807
Deferred income taxes (Note 3) 1,406 2,476
Prepaid expenses and other current assets (Note 9) 4,857 5,275
-------- --------
Total current assets 87,028 105,264
PROPERTY AND EQUIPMENT--Net of accumulated
depreciation and amortization (Notes 2 and 7) 130,279 135,986
OTHER ASSETS 3,845 4,135
-------- --------
TOTAL ASSETS $221,152 $245,385
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 14,864 $ 23,399
Accrued expenses (Note 6) 3,361 7,237
Obligations to customers (Note 4) 3,500 4,305
Taxes other than income taxes 1,057 1,345
Income taxes payable (Note 3) 4,141 5,882
Short term borrowings (Note 5) -- 2,900
Current portion of obligations
under capital lease (Note 7) 234 278
-------- --------
Total current liabilities 27,157 45,346
-------- --------
OBLIGATIONS UNDER CAPITAL LEASE (Note 7) 1,974 1,696
-------- --------
DEFERRED INCOME TAXES (Note 3) 1,416 1,002
-------- --------
COMMITMENTS AND CONTINGENT LIABILITIES (Notes 7 and 9)
SHAREHOLDERS' EQUITY (Note 8):
Common stock, 17,692 and 17,694 shares
outstanding on January 1, 1994 and December 31, 1994,
respectively 885 885
Additional paid-in capital 11,695 11,709
Retained earnings 178,025 184,747
-------- --------
Total shareholders' equity 190,605 197,341
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $221,152 $245,385
======== ========
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
----------------------------------------------------
January 2, January 1, December 31,
1993 1994 1994
---------- ---------- ------------
NET SALES $319,623 $318,939 $326,651
-------- -------- --------
COSTS AND EXPENSES:
Cost of sales (Notes 1 and 9) 214,462 215,516 217,912
Operating, general and administrative 62,961 67,512 73,439
Occupancy 8,818 9,626 12,017
Depreciation and amortization 7,747 7,446 8,854
Interest - net (Note 5) 459 (243) 59
-------- -------- --------
294,447 299,857 312,281
INCOME BEFORE PROVISION FOR
INCOME TAXES 25,176 19,082 14,370
PROVISION FOR INCOME TAXES
(Note 3) 10,028 8,235 5,879
-------- -------- --------
NET INCOME $ 15,148 $ 10,847 $ 8,491
======== ======== ========
EARNINGS PER SHARE $ .86 $ .61 $ .48
======== ======== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING (Note 1) 17,690 17,690 17,693
======== ======== ========
CASH DIVIDEND PER SHARE $ -- $ .05 $ .10
======== ======== ========
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,
Authorized, Authorized,
1,000 Shares; 30,000 Shares;
$100 Par Value $.05 Par Value Additional
------------------ ----------------- Paid-in Retained
Shares Amount Shares Amount Capital Earnings
------ ------ ------ ------ ---------- --------
BALANCE--
DECEMBER 28, 1991 -- $ -- 17,690 $ 885 $ 11,677 $ 152,915
Exercise of stock options -- -- -- -- -- --
Net income - 1992 -- -- -- -- -- 15,148
----- ----- ------ ------ ------- --------
BALANCE--
JANUARY 2, 1993 -- -- 17,690 885 11,677 168,063
Exercise of stock options -- -- 2 -- 18 --
Cash Dividend -- -- -- -- -- (885)
Net income - 1993 -- -- -- -- -- 10,847
----- ----- ------ ------ ------- --------
BALANCE--
JANUARY 1, 1994 -- -- 17,692 885 11,695 178,025
----- ----- ------ ------ ------- --------
Exercise of stock options -- -- 2 -- 14 --
Cash dividend -- -- -- -- -- (1,769)
Net income--1994 -- -- -- -- -- 8,491
----- ----- ------ ------ ------- --------
BALANCE--
DECEMBER 31, 1994 -- $ -- 17,694 885 $11,709 $184,747
----- ----- ------ ------ ------- --------
See notes to consolidated financial statements.
F-4
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Fiscal Year Ended
----------------------------------------------------
January 2, January 1, December 31,
1993 1994 1994
---------- ---------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $15,148 $10,847 $ 8,491
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,747 7,446 8,854
Deferred income taxes (804) (684) (1,484)
Gain on sale of property and equipment (4) (10) (73)
Changes in operating assets and liabilities:
Merchandise inventories 3,524 (11,686) (17,389)
Prepaid expenses and other current assets (1,831) (681) (418)
Other assets (1,237) (702) (290)
Accounts payable (6,785) 9,259 8,535
Accrued expenses (448) 625 3,876
Taxes other than income taxes (130) (464) 288
Obligations to customers 408 90 805
Income taxes 2,391 (1,743) 1,741
------- ------- -------
Net cash provided by operating activities 17,979 12,297 12,936
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (5,400) -- --
Proceeds from redemption of marketable securities 100 5,300 --
Expenditures for property and equipment (6,713) (17,508) (14,591)
Proceeds from sale of property and equipment 68 30 103
------- ------- -------
Net cash used in investing activities (11,945) (12,178) (14,488)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividend -- (885) (1,769)
Repayments of long-term debt and
obligations under capital lease (4,882) (198) (234)
Proceeds from bank loan -- -- 2,900
Exercise of options -- 18 14
------- ------- -------
Net cash (used in) provided by financing activities (4,882) (1,065) 911
------- ------- -------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,152 (946) (641)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 1,141 2,293 1,347
------- ------- -------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 2,293 $ 1,347 $ 706
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (net of interest capitalized) $ 490 $ 42 $ 253
======= ======= =======
Income taxes $ 8,497 $10,646 $ 5,106
======= ======= =======
See notes to consolidated financial statements.
F-5
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED JANUARY 2, 1993,
JANUARY 1, 1994 AND DECEMBER 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principal Business--Syms Corp operates thirty-nine Syms retail stores
(thirty-four in 1993 and twenty-nine in 1992) which sell "off-price"
apparel for men, women and children.
b. Principles of Consolidation--The consolidated financial statements
include the accounts of Syms Corp and its subsidiaries (the "Company"),
all of which are wholly owned. All significant intercompany accounts and
transactions have been eliminated.
c. Accounting Period--The Company's accounting period ends on the Saturday
nearest to December 31. The fiscal years ended December 31, 1994 and
January 1, 1994 were comprised of 52 weeks. The fiscal year ended January
2, 1993 was comprised of 53 weeks.
d. Merchandise Inventories--Merchandise inventories are stated at the lower
of cost (first in, first out) or market, as determined by a retail
inventory method. During the fiscal year ended December 31, 1994, the
Company changed its method of valuing inventory by computing separate cost
complements for each department within its five merchandise categories. In
the past, the Company computed a single cost complement for each of its
five merchandise categories. Management believes the change results in a
more accurate inventory valuation. This change resulted in a total
increase to gross margin of $780,000 of which approximately one half
relates to prior years. The Company considers that the effect on 1994 and
prior years is not material.
e. Depreciation and Amortization--Depreciation is computed principally by
the straight-line method at rates adequate to allocate the cost of
applicable assets over their expected useful lives. The cost of leaseholds
and leasehold improvements are amortized over the terms of the leases or
the useful lives of the assets, whichever is shorter.
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.
f. Income Taxes--During the year ended January 3, 1993, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes," which requires an asset and liability approach to
financial accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed annually for differences between the
financial statement and tax bases of assets and liabilities that will
result in taxable or deductible amounts in the future. Such deferred
income tax asset and liability computations are based on enacted tax laws
and rates applicable to periods in which the differences are expected to
affect taxable income. Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be realized.
Income tax expense is the tax payable or refundable for the period plus or
minus the change during the period in deferred tax assets and liabilities.
The cumulative effect of adopting SFAS No. 109 on the Company's financial
statements was not material.
F-6
g. Earnings Per Share--Earnings per share are based on net income for each
year divided by the weighted average number of shares outstanding during
each period. In 1992, 1993 and 1994, no effect has been given to
outstanding common stock options, as their effect would be immaterial.
h. Financial Statement Presentation--Syms Corp considers all short-term
investments with a maturity of three months or less as cash equivalents.
i. Fair Value of Financial Instruments--The Company has estimated the fair
value of financial instruments using available market information and
other valuation methodologies in accordance with SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments." Management of the
Company believes that the fair value of financial instruments for which
estimated fair value has not been specifically presented is not materially
different than the related carrying value. Determinations of fair value
are based on subjective data and significant judgment relating to timing
of payments and collections and the amounts to be realized. Different
assumptions and/or estimation methodologies might have a material effect
on the fair value estimates. Accordingly, the estimates of fair value are
not necessarily indicative of the amounts the Company would realize in a
current market exchange.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of:
January 1, December 31,
1994 1994
--------- ----------
(In Thousands)
Land $ 27,767 $ 34,060
Buildings and building improvements 89,965 100,519
Leasehold and leasehold improvements 19,039 22,782
Machinery and equipment 13,142 14,465
Furniture and fixtures 13,725 14,923
Capital lease 3,763 3,763
Construction in progress 10,684 1,674
--------- ---------
178,085 192,186
Less accumulated depreciation and amortization 47,806 56,200
--------- ---------
$ 130,279 $ 135,986
========= =========
F-7
3. INCOME TAXES
The provision for income taxes is as follows:
Fiscal Year Ended
----------------------------------------------------
January 2, January 1, December 31,
1993 1994 1994
---------- ----------------- ------------
(In Thousands)
Current:
Federal .................................... $ 8,310 $ 7,152 $ 5,956
State ...................................... 2,522 1,767 1,407
--------- -------- ----------
10,832 8,919 7,363
--------- -------- ----------
Deferred:
Federal .................................... (627) (528) (1,202)
State ...................................... (177) (156) (282)
--------- -------- ----------
(804) (684) (1,484)
--------- -------- ----------
$ 10,028 $ 8,235 $ 5,879
========= ======== ==========
As indicated in note 1, the Company adopted Statement of Accounting
Standards No. 109 "Accounting for Income Taxes" in 1993. The adoption of
this Statement had no material effect on the 1993 provision for income
taxes.
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
---------------------------------------------------
January 2, January 1, December 31,
1993 1994 1994
---- ---- ----
Statutory Federal income tax rate ................ 34.0% 35.0% 35.0%
State taxes, net of Federal income
tax benefits ................................... 6.1 5.3 5.5
Officers' life insurance ......................... (.2) 1.4 .4
Other, net ....................................... (.1) 1.5 --
---- ---- ----
Effective income tax rate ........................ 39.8% 43.2% 40.9%
===== ===== =====
F-8
The composition of the Company's deferred tax assets and liabilities is as
follows:
(In Thousands)
January 1, December 31,
1994 1994
------- -------
Deferred tax assets:
Capitalization of inventory costs ..... $ 1,225 $ 1,760
Capital lease ......................... 568 470
Other ................................. 181 816
------- -------
Total deferred tax assets $ 1,974 $ 3,046
Deferred tax liability:
Depreciation method and different
estimated lives ..................... (1,984) (1,572)
------- -------
Net................................. $ (10) $ 1,474
======= =======
Classified in balance sheet as follows:
Current deferred tax asset ............ $ 1,406 $ 2,476
Deferred tax liablity (net of
noncurrent deferred tax asset) ...... (1,416) (1,002)
------- -------
Net ............................... $( 10) $ 1,474
======= =======
4. OBLIGATIONS TO CUSTOMERS
Obligations to customers represent credits issued for returned merchandise as
well as gift certificates. The Company's policy is to allow customers to
exchange credits issued for merchandise.
5. FINANCING
The Company has a revolving credit agreement with a bank for a line of credit
not to exceed $40,000,000 through December 1, 1997. 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. As of December
31, 1994 there were $2,900,000 in outstanding borrowings under this
agreement.
The agreement establishes certain covenants, including the maintenance of
consolidated tangible net worth of not less than $160,000,000 and maximum
capital expenditures, including dividends, of $41,000,000.
Total interest charges incurred for the years ended January 2, 1993, January
1, 1994 and December 31, 1994, including amounts related to capital leases,
were $924,000, $474,000 and $865,000, respectively, of which $203,000,
$431,000 and $612,000 were capitalized in 1992, 1993 and 1994, respectively,
in connection with the purchase and construction of new facilities.
The interest rate on short term borrowings was 7.0% at December 31, 1994.
There were no borrowings at January 1, 1994 and January 2, 1993.
F-9
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 table sets forth the Plan's funded status and amounts
recognized in the Company's consolidated balance sheet:
January 1, December 31,
1994 1994
---------- ------------
(In Thousands)
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested
benefits of $2,500 in 1993 and $3,156 in 1994 $ 2,700 $ 3,355
======= =======
Projected benefit obligation $ 3,407 $ 3,393
Plan assets at fair value, primarily mutual
funds and United States Treasury bills 3,018 2,853
------- -------
Plan assets less than projected benefit obligation (389) (540)
Unrecognized net loss 354 375
Unamortized net asset at transition (203) (177)
------- -------
Accrued pension cost (included in accrued expenses) $ (238) $ (342)
======= =======
Pension expense includes the following components:
Fiscal Year Ended
------------------------------------------
January 2, January 1, December 31,
1993 1994 1994
---------- ---------- ------------
In Thousands)
Service cost-benefits earned during
the period $ 364 $ 370 $ 384
Interest cost on projected benefit
obligation 205 224 248
Actual return on plan assets (359) (249) (193)
Net amortization and deferral 125 (8) (82)
----- ----- -----
Net periodic pension cost $ 335 $ 337 $ 357
===== ===== =====
F-10
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation was 7.75% and 4.5%, respectively, and the
expected long-term rate of return on plan assets was 8.5% during each of
the years ended January 2, 1993, January 1, 1994 and December 31, 1994.
b. Profit-Sharing Plan--The Company has a profit-sharing plan for all
employees other than those covered under collective bargaining agreements.
Contributions to the profit-sharing plan are made at the discretion of the
Plan's administrators.
Profit-sharing plan contributions were, $135,000, $130,000 and $130,000
for the years ended, January 2, 1993, January 1, 1994 and December 31,
1994, respectively.
7. COMMITMENTS AND CONTINGENT LIABILITIES
a. Leases--The Company has various operating leases and one capital lease
for its retail stores, with terms expiring between 1995 and 2008. The
Company also has a ground lease that expires in 2276. In addition, 21
stores are owned by the Company. 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 December 31, 1994 are as follows:
Capital Lease Operating
Real Estate Leases
------------- ---------
(In Thousands)
1995 $ 600 4,006
1996 600 3,969
1997 600 3,710
1998 600 2,951
1999 550 2,138
Thereafter--cumulative -- 33,574
-------- ---------
Total minimum payments 2,950 $ 50,348
=========
Less amount representing interest 976
--------
Present value of net minimum lease payments 1,974
Less current maturities 278
--------
$ 1,696
========
Payments under the real estate capital lease, which expires in 1999, are
payable to the Company's principal shareholder. Rental payments were
$600,000 during each of the years ended, January 2, 1993, January 1, 1994
and December 31, 1994.
F-11
Rent expense for operating leases is as follows:
Fiscal Year Ended
----------------------------------------------------
January 2, January 1, December 31,
1993 1994 1994
--------- --------- -----------
(In Thousands)
Minimum rentals $1,881 $2,425 $4,030
Escalation rentals 9 9 9
Contingent rentals 33 28 25
Sublease rentals (177) (192) (192)
------ ------ ------
$1,746 $2,270 $3,872
====== ====== ======
b. Other Commitments--At December 31, 1994, the Company had outstanding
letters of credit in the amount of $4,290,000
8. CAPITAL STOCK--STOCK OPTION PLAN
The Company maintains a stock option plan pursuant to which options to
purchase a maximum of 1,000,000 shares of common stock may be granted in the
form of either incentive stock options, as defined in Section 422A of the
Internal Revenue Code of 1954 (as amended), non-qualified stock options, or
stock appreciation rights. The plan requires that all incentive stock options
be granted at an exercise price equal to the fair market value of the common
stock at the date of grant. The exercise price of the option for holders of
more than 10% of the voting rights of the Company must be equal to 110% of
the fair market value at 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). The options are exercisable at a rate of 20% per
year.
Transactions for 1992, 1993 and 1994 are as follows:
Fiscal Year Ended
----------------------------------------------------
January 2, January 1, December 31,
1993 1994 1994
---------- ---------- ------------
(In Thousands, Except Per Share Amounts)
Options outstanding, beginning of year 469 472 547
Granted 91 122 57
Exercised - (2) (2)
Cancelled (88) (45) (73)
--- ---- ----
Options outstanding, end of year 472 547 529
=== === ===
Option price range at year-end $ 7.12 $ 7.12 $ 7.12
to to to
$12.25 $12.25 $12.25
F-12
9. OTHER TRANSACTIONS
Included in cost of sales for the three fiscal years ended January 2, 1993,
January 1, 1994 and December 31, 1994 are purchases of approximately
$5,406,000, $7,110,000 and $6,322,000, respectively, from a company related
to the principal shareholder, as well as a licensee of the related company.
In addition, during 1991 the Company entered into an agreement with the
licensee to purchase annually approximately $4,200,000 of suits for a period
of five years. Included in prepaid expenses and other current assets at
January 1, 1994 and December 31, 1994 are advances to these entities
totalling approximately $2,314,000 and $3,519,000, respectively. These
advances are for purchases to be received in the following year. In addition,
the Company has guaranteed a letter of credit on behalf of the licensee
totalling approximately $500,000.
* * * * * *
F-13
SYMS CORP AND SUBSIDIARIES
SUPPLEMENTARY FINANCIAL INFORMATION
(In Thousands, Except Per Share Amounts)
- - ----------------------------------------------------------------------
UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
Quarter
---------------------------------------------
First Second Third Fourth
-------- -------- -------- ---------
YEAR ENDED JANUARY 1, 1994:
Net sales $66,875 $79,347 $73,322 $ 99,395
======= ======= ======= ========
Gross profit $21,399 $25,392 $23,463 $ 33,169
======= ======= ======= ========
Net income $ 1,079 $ 2,748 $ 1,863 $ 5,157
======= ======= ======= ========
Earnings per share $ .06 $ .16 $ .11 $ .29
======= ======= ======= ========
YEAR ENDED DECEMBER 31, 1994:
Net sales $68,642 $80,015 $77,813 $100,181
======= ======= ======= ========
Gross profit $21,966 $26,348 $25,289 $ 35,136
======= ======= ======= ========
Net income $ 325 $ 1,654 $ 1,464 5,048
======= ======= ======= ========
Earnings per share $ .02 $ .09 $ .08 $ .29
======= ======= ======= ========
The Company estimates interim gross profits based principally upon historical
experience, which yields less precise results than the method used for year-end
valuation purposes. The fourth quarter results for the periods ended January 1,
1994 and December 31, 1994 were impacted by a difference in gross profit
determined as a result of physical inventories taken at year-end. This resulted
in an increase to gross profit of approximately $938 and $1,787 for the fourth
quarters ended January 1, 1994 and December 31, 1994, respectively. In addition,
the fourth quarter results for the period ended December 31, 1994 were impacted
by the change in method of valuing the ending inventory totaling approximately
$780. Beginning in 1995, the Company has installed a retail method of accounting
which will more accurately reflect quarterly gross margins.
F-14
SYMS CORP
INDEX TO EXHIBITS
List of Exhibits:
The following exhibits which are marked with an asterisk are filed as part
of this 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-I under the Securities
Act of 1933 (Registration No. 2-85554) filed Augsut 2, 1983 and declared
effective September 23, 1983 or (ii) where indicated, the Company's reports on
Form 8-K 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 (+).
Exhibit Description Page No.
------- ----------- --------
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
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
9.1 Voting Trust Agreement, dated July 25, 1983
9.2 Supplemental Agreement and Amendment to Voting Trust Agreement, dated as of
December 15, 1994 (Exhibit 9.1 to Form 8-K dated December 15, 1994)
10.3 Leased Premises: Elmsford (White Plains), New York
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 Plan
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)
E-1
Exhibit Description Page No.
------- ----------- --------
10.32 Revolving Credit Agreement dated as of December 1, 1993 between Syms Corp and United
Jersey Bank 8-K Report dated December 7, 1993)
*21 List of Subsidiaries of the Company E-3
*23 Consent of Deloitte & Touche, LLP E-4
*27 Financial Data Schedule E-5
E-2