(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 25, 2012
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| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACTOF 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 | |||
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(State or Other Jurisdiction of | (I.R.S. Employer Identification No.) | |||
Incorporation or Organization) | ||||
One 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:Act:
| Name of Each Exchange on | |
Title of Each class | Which Registered | |
Common Stock, $0.05 Par Value Per Share |
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Securities registered pursuant to Section 12 (g) of the Act: None |
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Yeso¨ Noþ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yeso¨ Noþ
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yeso¨ Noþ
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yeso¨ Noo¨ Not Applicableþ
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.o¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filero¨ Accelerated Filerþ Non-Accelerated Filero¨ Smaller Reporting Companyo
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(Do not check if smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yeso¨ Noþ
As of August 29, 2009,26, 2011, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $110,005,000$129,311,296 based on the closing sale price as reported on the NASDAQ Global Select Market.
As of April 15, 2010,May 25, 2012, 14,448,188 shares of the registrant’s Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for the 20102012 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report.
| SYMS CORP. |
Form 10-K Index
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| PART I |
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| Item 1. | Business | 2 | |
| Item 1A. | Risk Factors | 7 | |
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| Mine Safety Disclosures |
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| PART II | |||
Market for Matters and Issuer Purchases of Equity Securities |
12 | ||
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 | ||
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| Data. |
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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20 | |||
| Item 9A. | Controls and Procedures | 20 | |
| Item 9B. | Other Information | 23 | |
| PART III | |||
| Item 10. |
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Certain Relationships, Related Transactions and Director Independence |
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| PART IV | |||
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General
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| SYMS CORP. |
PART I
Item 1.BUSINESS
General
As further described below, Syms Corp (theCorp. (“Syms” or the “Company”) operatesand its subsidiaries filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Bankruptcy Code (“Bankruptcy Code” or “Chapter 11”) in the United States Bankruptcy Court for the District of Delaware (the “Court”) and are currently operating as “debtors-in-possession” under the jurisdiction of the Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Court.
Overview. Prior to filing for bankruptcy, the Company and its wholly-owned subsidiary, Filene’s Basement, LLC (“Filene’s,” “Filene’s, LLC” or “Filene’s Basement”), collectively owned and operated a chain of 2746 “off-price” retail stores under the “Syms” name “Syms”(which were owned and operated by the Company) and “Filene’s Basement” name (which were owned and operated by Filene’s, LLC). TheseThe stores arewere located in the United States throughout the Northeastern and Middle Atlantic regions and in the Midwest, Southeast and Southwest. Each Syms store offersand Filene’s Basement stores offered a broad range of first quality, in-season merchandise, bearing nationally recognized designer or brand-name labels for men, women and children at prices substantially lower than those generally found in department and specialty stores. On June 18, 2009, the Company, through aCompany’s wholly-owned subsidiary, SYL, LLC now known as Filene’s Basement, LLC acquired certain real property leases, inventory, other property, equipment and other assets of Filene’s Basement Inc. (“Filene’s”Filene’s Inc.” or “Filene’s Basement”Basement Inc.”), then a Chapter 11 debtor-in-possession operating a retail clothing chain, pursuant to an auction conducted in accordance with § 363 of the Federal Bankruptcy Code. As a result, in addition to the 27 Syms stores, since June 19, 2009, the Company has alsoFilene’s, LLC thereafter owned and operated 2321 Filene’s Basement stores that arethen located in the Northeastern, Middle Atlantic, Midwest and Southeast regions. regions until Filene’s, LLC itself became a Chapter 11 debtor, along with the Company, and discontinued its retail operations on or about December 31, 2011. In addition, Syms owned and operated five co-branded Syms/Filene’s Basement also offers a broad range of first quality brand namestores. Syms and designer clothing for men, women and children. The Company operatesFilene’s, LLC operated in a single operating segment – the operation of “off-price” retail stores.stores segment.
The Company was incorporated in New Jersey in 1983. The Company maintains a 311,000 square foot distribution center and executiveits headquarters at One Syms Way, Secaucus, New Jersey 07094,07094. The Company’s headquarters may be reached by telephone at (201) 902-9600. Unless otherwise noted, and notwithstanding (i) that Syms owned and operated Syms and co-branded Syms/Filene’s Basement stores and (ii) that Filene’s, LLC is a separate legal entity and owned and operated Filene’s Basement stores, references to the “Company”, “we”, or “our”, “Syms” or” Syms/Filene’s” relate to Syms, Corp.including its wholly-owned subsidiary Filene’s, LLC. Our fiscal year ends on the Saturday closest to the last day of February each year. Fiscal 2011 ended on February 25, 2012, fiscal 2010 ended on February 26, 2011, and fiscal 2009 ended on February 27, 2010; fiscal 2008 ended2010.
The discussion below is herein presented on February 28, 2009,a consolidated basis and fiscal 2007 endedincludes information regarding the Company and its wholly-owned subsidiary Filene’s, LLC.
Chapter 11 Cases. The Company and its subsidiaries filed voluntary petitions for reorganization relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware and are currently operating as “debtors-in-possession”. The following discussion provides general background information regarding our Chapter 11 cases as relevant to the consolidated financial statements of the Company and its subsidiaries and is not intended to be an exhaustive summary.
Additional information on the Company’s filing under the Bankruptcy Code, including access to Court documents and other general information about the Chapter 11 cases, is available online at www.kccllc.net/filenes. Financial information available on that website generally is prepared according to requirements of federal bankruptcy law. While such financial information accurately reflects information required under federal bankruptcy law, such information may be unconsolidated, unaudited, and prepared in a format different from that used in the Company’s consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and filed under the U.S. securities laws. Moreover, the materials filed with the Court are not prepared for the purpose of providing a basis for an investment decision relating to the Company’s securities or for comparison with other financial information filed with the U.S. Securities and Exchange Commission (“SEC”).
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Commencement of Cases
On November 2, 2011 (the “Petition Date”), Syms and its subsidiaries (collectively, the “Debtors”) filed voluntary petitions for reorganization under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware (the “Chapter 11 Filings”). The Court is jointly administering these cases as “In re Filene’s Basement, L.L.C., et al, Case No. 11-13511 (KJC).”
Court Orders
On the Petition Date, the Debtors filed various motions with the Bankruptcy Court requesting permission to continue operating various aspects of their business as the Debtors wound down their retail operations. The Debtors were granted authority to continue honoring their obligations to their employees and customers; to continue paying their tax obligations in the ordinary course; and to continue operating their existing cash management system in the ordinary course.
The Office of the United States Trustee thereafter appointed two statutory committees in these Chapter 11 cases (together, the "Committees"): an Official Committee of Unsecured Creditors (the "Creditors Committee"), charged with a fiduciary duty to represent the interests of the Debtors' unsecured creditors, and an Official Committee of Syms' Equity Security Holders (the "Equity Committee"), charged with a fiduciary duty to represent the interests of Syms' shareholders. The members of the Creditors' Committee are (i) PVH Corp., (ii) Rabina Properties, LLC, (iii) Rosenthal & Rosenthal, Inc. and (iv) Vornado Realty Trust; the members of the Equity Committee are (i) DS Fund I, LLC, (ii) Esopus Creek Value Series Fund LP – Series "L", (iii) Franklin Value Investors Trust, Franklin Balance Sheet Investment Fund, (iv) Kahn Brothers Group, Inc., and (v) Marcato Capital Management, LLC.
Activity During the Chapter 11 Cases
Store Closing Sales. Immediately upon filing their Chapter 11 petitions, the Debtors sought Bankruptcy Court approval to conduct going-out-of-business sales with the assistance of a liquidation agent. On November 16, 2011, the Bankruptcy Court entered an order that authorized the Debtors to enter into an agency agreement with a joint venture between Gordon Brothers Retail Partners, LLC and Hilco Merchant Resources, LLC as liquidation agent to commence the store closing sales at the Debtors' then remaining forty-one store locations. The Bankruptcy Court further authorized the Debtors to assume an agency agreement that they had entered into prior to filing the Chapter 11 cases with respect to five Filene's retail locations and to continue store closing sales that had been commenced at those locations.
The commencement of these Chapter 11 cases and the store closing sales were timed to coincide with the holiday shopping season so that the Debtors could have the benefit of, among other things, the "Black Friday" shopping weekend after the Thanksgiving holiday. The Debtors sold virtually all their inventory and much of their furniture, fixtures and equipment during the store closing process. The sales concluded across their various locations in the last days of December 2011. On or about December 31, 2011, the Debtors had ceased retail operations at all of their stores and vacated all their leased retail store and distribution center locations.
Real Estate Matters. As of the Petition Date, the Debtors were lessees under thirty-five commercial real estate leases. The Debtors, with the assistance of the Committees, developed a process for marketing those leases in an effort to sell them or to terminate one or more of them with the agreement of their landlords in order to minimize costs and claims under such leases. On December 16, 2011, the Bankruptcy Court entered an order that approved the Debtors' proposed procedures for the disposition of their leases. Hilco Real Estate, LLC ("Hilco Real Estate") was retained to assist the Debtors, and conducted an extensive lease marketing process.
The marketing process resulted in the sale of the Debtors' interest in, or consensual termination of, certain of the Debtors' leases. The Debtors rejected several other leases effective as of December 31, 2011. Under the Bankruptcy Code, when a debtor rejects a real estate lease, the rejection is considered a breach that gives rise to a claim for breach by the landlord against the debtor. However, the Bankruptcy Code imposes certain caps on the maximum amount of breach claims that a landlord may assert.
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Treatment of Prepetition Claims. Under section 362 of the Bankruptcy Code, actions to collect most of the Debtors’ prepetition liabilities, including payments owing to vendors in respect of goods furnished and services provided prior to the Petition Date, are automatically stayed and other prepetition contractual obligations of the Debtors generally may not be enforced.
The stay of proceedings provisions of section 362 of the Bankruptcy Code also apply to actions to collect prepetition indebtedness or to exercise control over the property of the Debtors’ estate. The rights of and ultimate payments by the Debtors under prepetition obligations will be addressed in any plan of reorganization and may be substantially altered. This could result in unsecured claims being compromised at less, and possibly substantially less, than 100% of their face value.
Contract Rejection and Assumption Process. Section 365 of the Bankruptcy Code permits the Debtors to assume, assume and assign, or reject certain prepetition executory contracts subject to the approval of the Court and certain other conditions. Rejection constitutes a court-authorized breach of the contract in question and, subject to certain exceptions, relieves the Debtors of their future obligations under such contract but creates a deemed prepetition claim for damages caused by such breach or rejection. Parties whose contracts are rejected may file claims against the rejecting Debtor for damages. Generally, the assumption, or assumption and assignment, of an executory contract requires the Debtors to cure all prior defaults under such executory contract and to provide adequate assurance of future performance. In this regard, the Company expects that additional liabilities subject to compromise and resolution in the Chapter 11 cases may arise as a result of damage claims created by the Debtors’ rejection of executory contracts. Conversely, the Company would expect that the assumption of certain executory contracts may convert existing liabilities shown as subject to compromise to liabilities not subject to compromise in future financial statements. Due to the uncertain nature of many of the potential claims, the Company is unable to project the magnitude of such claims with any degree of certainty at this time.
Case Resolution
Exclusivity. Under the Bankruptcy Code, the Debtors have the exclusive right for 120 days from the date of the filing to file a plan of reorganization and 60 additional days to obtain necessary acceptances. As of May 15, 2012, the Debtors have filed motions to extend such exclusive periods and the Equity Committee has filed a motion to terminate same. The Bankruptcy Court may render a decision on such motions at any time.
Proofs of Claim. On January 18, 2012, the Bankruptcy Court entered an order establishing March 1, 2008.
Description2012 as the bar date for creditors to file their claims with the Bankruptcy Court. Shortly thereafter, the Debtors commenced notification, including publication, to all reasonably ascertainable actual and potential creditors informing them of Businessthe bar date and the required procedures with respect to the filing of proofs of claim with the Court. The Debtors are in the process of reviewing and reconciling claims, and anticipate filing objections to numerous claims over the course of the next several months. Any differences between claim amounts listed by the Debtors in their Schedules of Assets and Liabilities and claims filed by creditors will be investigated and, if necessary, the Court will make the final determination as to the amount, nature, and validity of claims.
The Syms/Filene’s chain
Chapter 11 Plan.After a Chapter 11 plan of 50 apparel stores offersreorganization or liquidation has been filed with the Court, the plan, along with a broad range of “off-price” first quality, in-season merchandise consisting primarily of men’s tailored clothingdisclosure statement approved by the Court, will be sent to all creditors, equity holders 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. The Filene’s Basement stores also provide a wide selection of designer and famous brand name merchandise.parties in interest. Following the solicitation period, the Court will consider whether to confirm the plan. In addition to men’sbeing voted on by holders of impaired claims and women’s apparel and shoes, the Filene’s stores also carryequity interests, a selectionplan of jewelry and home goods.
Syms operates in a single industry segment and has no foreign operations. No material partreorganization or liquidation must satisfy certain requirements of the Company’s revenuesBankruptcy Code and must be approved, or confirmed, by the Court in order to become effective. Under certain circumstances, the Court may confirm a plan even if such plan has not been accepted by all impaired classes of claims and equity interests. A class of claims or equity interests that does not receive or retain any property under the plan on account of such claims or interests is received fromdeemed to have voted to reject the plan. The precise requirements and evidentiary showing for confirming a single customerplan notwithstanding its rejection by one or groupmore impaired classes of customers. Please refer to Note 1claims or equity interests depends upon a number of factors, including the status and seniority of the Financial Statements for information on segment reporting.
Merchandiseclaims or equity interests in the rejecting class, i.e., secured claims or unsecured claims, subordinated or senior claims, preferred or common stock.
For fiscal 2009, net sales were generated
As a result of the Chapter 11 Filings, realization of assets and liquidation of liabilities are subject to uncertainty. Further, a plan of reorganization or liquidation could or will materially change the amounts and classifications reported in the consolidated financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of confirmation of a Chapter 11 plan.
Under the priority scheme established by the following categories:Bankruptcy Code, unless creditors agree otherwise, post-petition liabilities and prepetition liabilities must be satisfied in full before shareholders are entitled to receive any distribution or retain any property under a plan of reorganization or liquidation. The ultimate recovery to creditors and/or shareholders, if any, will not be determined until confirmation of a Chapter 11 plan. No assurance can be given as to what values, if any, will be ascribed in the Chapter 11 cases to each of these constituencies or what types or amounts of distributions, if any, they would receive.
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A plan of reorganization or liquidation could result in holders of Syms’ stock receiving no distribution on account of their interests and cancellation of their existing stock. If certain requirements of the Bankruptcy Code are met, a Chapter 11 plan can be confirmed notwithstanding its rejection by Syms’ equity security holders and notwithstanding the fact that such equity security holders do not receive or retain any property on account of their equity interests under the plan. Syms considers the value of its common stock to be highly speculative and strongly cautions equity holders that the stock may ultimately be determined to have no value. Accordingly, the Company urges that appropriate caution be exercised with respect to existing and future investments in its common stock or other equity securities, or any claims relating to prepetition liabilities.
Costs. We have incurred, and will continue to incur, significant costs associated with the reorganization for professional fees for advisors to the Debtors, and to other stakeholders in the Chapter 11 cases.
Merchandise
| For the eight months ended October 29, 2011 net sales were generated by the following categories: |
Women’s dresses, suits, separates and accessories |
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Men’s tailored clothes and haberdashery |
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Children’s | 5 | % | ||
Luggage, domestics and fragrances | 5 | % | ||
Shoes |
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| Total | 100 | |||
| % |
Most of the items sold by the Company consistconsisted of nationally recognized fashionsdesigner and brand-name merchandise. Merchandise iswas generally displayed by department, class and size on conveniently arranged racks, fixtures, tables or counters. No emphasis iswas placed on any particular “label” or brand. TheMost Syms branded stores generally offeroffered minor alterations for an additional charge.
Purchasing
The Company purchasespurchased first quality, in-season, brand-name merchandise directly from manufacturers on terms it believes arebelieved were more favorable than those generally obtained by department and specialty stores. Syms estimatesWe estimated that approximately 1,100
900 designer and brand-name manufacturers of apparel aremerchandise were represented in itsour stores. The Company generally does not maintain large out-of-season inventories. However, Symswe occasionally buyspurchased certain basic clothing which does not change in style from year to year at attractive prices for storage until the following season. Purchasing iswas performed by a buying staff in conjunction with Merchandise Managers.
Co-branding
Co-Branding
The Company converted four former Syms stores (Norwood, MA, Berlin, CT, Elmsford, NY and Westbury, NY) to co-branded stores in fiscal 2010. In fiscal 2009, the Company converted one former Syms store (Fairfield, CT) to a Co-branded store in fiscal 2009. This is a hybrid Filene’s Basement/co-branded store. These stores carried the names of both Syms store which is divided into two areas, with the Syms side stocking menswear, children’s apparel and men’s and women’s shoes, and the Filene’s Basement side featuring women’s fashions and accessories, home goods and luggage. The Co-branded concept combinescombined the strengths of both brands. We are monitoring customer reaction and if successful, we plan to identify two to four more locations to be converted into Co-brandedbrands with an expanded selection of women’s merchandise in the former Syms stores.
Distribution
The
As of January 2011 the Company operated a 457,000 square foot leased distribution facility situated on 32.8 acres in Auburn, Massachusetts. In addition, the Company owns a facility located at One Syms Way,in Secaucus, New Jersey. TheThis facility contains approximately 277,000276,000 square feet of warehouse and distribution space, 34,00036,000 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 267approximately 265 years.
Since the acquisition of assets from Filene’s Basement’sBasement, Inc. in June 2009, the Company had continued to assess the most effective manner in which to integrate the operations of Filene’s and Syms to maximize the synergies of the two businesses. This plan included the consolidation of distribution center functions. The consolidation of distribution center functions involved a shift of most merchandise isprocessing to the Company’s Massachusetts distribution center.
The New Jersey distribution center served to replenish the high volume New York City stores, process Bridal and Vault (fashion/designer apparel) and housed the adjoining retail store and corporate offices. Most of the merchandise was processed and distributed from a 457,000 square foot leasedthe Massachusetts distribution facility situated on 32.8 acres in Auburn, Massachusetts, outside of metropolitan Boston, Massachusetts. Most merchandise iswhere it was received from manufacturers, at the distribution centers where it is inspected, ticketed and allocated to particular stores.
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Marketing
The Company’s stores offered everyday low pricing policy for itsin key fashion categories along with home goods and accessories. Syms stores is to affix a ticket to each item displaying Syms’ selling pricehad 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 susceptible to considerable style fluctuation, Syms has long utilized an 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 fourteen selling days. For fiscal 2009, women’s dresses represented approximately 2.1% of net sales. The Company also offers “dividend” prices consisting of additional price reductions on various types of merchandise at various times.
Syms has as its tag linetheir tagline “An Educated Consumer is Our Best Customer”®™, one of the best known and longest lasting taglines in retail advertising.retail. The Company advertisesbelieved that the Syms store customers were very loyal and appreciated and understood great brands at great prices. Filene’s Basement’s tagline, “Where Bargains Were Born”™, illustrated its long standing position as the original off-price retailer. The Company believed that the Filene’s Basement customer had a high fashion IQ and recognized the value in what was being offered. They had continued to enhance the “Running of the Brides” events, a bridal gown event that was unique to Filene’s Basement and garnered a great deal of media attention.
Historically, the Company advertised principally on radio and periodically on television.radio. The Company also utilizesutilized print and billboard ads, as well as direct mail and electronic media including e-mail communication to registered customers. In addition, the Company utilized social media to enable it to communicate directly with its customer base.
The Filene’s Basement stores, “Where Bargains Were Born” ®, similarly offer everyday low pricing in key fashion categories, along
The Company’s policy was to affix a price ticket on most items displaying its selling price as well as the price the Company regarded as the traditional full retail price of that item at department or specialty stores. All garments were sold with home goods and accessories.the brand-name as affixed by the manufacturer. The Company believes that the Filene’s Basement customer base has a high fashion I.Q.utilized vendor names and recognizes the value in what is being offered and the need to purchase or risk losing unique items because of the changing nature of the assortment.“our price, their price” on its in-store signage.
The Company has historically had excellent, longstanding relationships with its suppliers. This made Syms/Filene’sthe Company a preferred choice for vendors with designer and famous brand overruns, department store cancellations and unmet volume objectives. These vendors understandunderstood that goods willwould be sold in an environment that supportssupported the stature of their brands.
Trademarks The buyers were encouraged to purchase merchandise of the quality and names that the customers desired.
Trademarks
Various trademarks including: “Syms”®â, “An Educated Consumer is Our Best Customer”®â, “Names You Must Know”®â, “The More You Know About Clothing, the Better it is for Syms”® andâ, “Rediscover Syms. Off price - On style”® â, “Running of the Brides”â,“Where Bargains Were Born”âand “I just got a bargain”âhave been registered with the United States Patent and Trademark Office. Filene’s Basement has traditionally been known for its unique bridal dress promotions, now hailed asThe Company’s registered trademarks are currently in the “Runningprocess of being liquidated pursuant to an auction process conducted by the Brides” ® and is also known as the place “Where Bargains Were Born” ®.
CompetitionCompany’s advisors.
Competition
The retail apparel business is highly competitive, and the Company accountsaccounted for only a small fraction of the total market for men’s, women’s and children’s apparel. The Company’s stores competecompeted with discount stores, specialty apparel stores, department stores, manufacturer-owned factory outlet stores and others. Many of the stores with which the Company competescompeted 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 entered or 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 and the use of on-line sites by other retailers. At various times of the year, department store chains and specialty shops offer brand-name merchandise at substantial markdowns.
Operations and Control Systems
The
In fiscal 2011, the Company has a merchandise control system which tracks a productcontinued the integration and upgrading of the Syms and Filene’s Basement management information systems. Product was tracked in approximately 450 different categories from its purchase to its ultimate sale in the Company’s stores. The system tracksPrior to the product by store in approximately 350 categories. All theCompany’s liquidation all information regarding the product iswas transmitted daily to the Company’s database at its executive headquarters. Each week thecentralized databases. The Company’s executives receivereceived detailed reports regarding sales and inventory levels in unitsat both the unit and retail dollarsdollar level on a store-by-store basis.basis daily. In addition, reports monitoring critical business processes were made available daily.
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| SYMS CORP. |
In 2010, the Company completed deploying its Point of Sale system in all the Company’s stores, providing the flexibility needed to better service its customers and enhance their in-store experience. In 2011, the Company upgraded its Allocation system in order to improve its ability to get the right product into the right store at the right time.
Management of the Company visitvisited stores on a regular basis to among other things, coordinate with theevaluate store managersperformance. During these visits, merchandise needs, visual displays, staffing and train employees inemployee issues, statistical store performance, and loss prevention methods.issues were reviewed. Stores havehad some combination of on-premises loss prevention or security personnel and various theft deterrent and prevention systems during normal hours and monitored security systems after hours.
Employees
At
As of February 27, 2010,25, 2012, the Company had approximately 3,00026 employees primarily staffed in an accounting and information technology capacity. Prior to the Company’s Chapter 11 filing, the Company had approximately 2,500 employees, of which approximately 1,600 work1,400 worked on a part time basis. ApproximatelyEach store employed approximately 30 to 100 persons,160 associates, consisting mostly of sales personnel, are employed at each Syms/Filene’s retail location. The Companypersonnel. Syms has collective bargaining agreements with Local 1102 and Local 108, both of the Retail Wholesale Department Store Workers Union whose agreements expired on March 31, 2009 and May 31, 2009, respectively. The Company signed extensions to the aforementioned agreements which expire on July 1,(RWDSU). These contracts were renegotiated in 2010 and Septemberhave expiration dates of October 31, 2013 and November 1, 2010,2013, respectively. The CompanySyms also has a collective bargaining agreement with Local 400 of the United Food and Commercial Workers Union whichUnion. This agreement was also renegotiated in 2010 and expired on April 30, 2009. The Company and Local 400 agreed to extend this agreement on a day-to-day basis. Negotiations have been scheduled for the first quarter of fiscal 2010.2012. Combined, thethese three local unions representrepresented approximately 1,100850 hourly employees at the Syms store locations. ForIn 2010, the Filene’s locations, the Company and Local 1102 have been working on a collective bargaining agreement that would cover approximately 900 additional employees, pending the approval by a majority of the employees. The Company believes its relationships with its unions are good. The Company is actively involved in negotiations of all three of its collective bargaining agreementsFilene’s Basement store employees voted to be represented by RWDSU Local 1102. A new agreement was negotiated which covered approximately 1,100 Filene’s Basement store employees and believes that there will be no disruptions to the Company’s operations and that the outcome of such negotiations will be at mutually acceptable terms.expires on June 21, 2012.
Available Information
The Company makes available on its web sitewebsite at www.syms.com under “Investor Info”Information” - “Press Releases/Releases and Financial Reports,” free of charge, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after the Company electronically files such material with, or furnishes such material to, the Securities and Exchange Commission (“SEC”).SEC. On the website, the Company also offers a link to all of the Company’s Securities and Exchange CommissionSEC filings and to all beneficial ownership reports filed by the Company’s directors and executive officers, via the SEC’s EDGAR filing system.
RISK FACTORS |
The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risk and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks materialize, our business,the financial condition operating results and cash flows could be materially adversely affected.
Risk Related to the Chapter 11 Proceedings
WeThe Company Will Be Subject To The Uncertainties Of The Bankruptcy Process
For the duration of the Chapter 11 Proceedings, the Company will be subject to the risks and uncertainties associated with our being in bankruptcy. These risks include:
| · | Syms’ ability to obtain approval of the Court with respect to motions filed in the Chapter 11 Proceedings from time to time; |
| · | Syms’ ability to obtain stakeholder and Court approval for, and then to consummate, a Chapter 11 bankruptcy plan. |
Syms will also be subject to risks and uncertainties with respect to the actions and decisions of the creditors and third parties who have incurred losses in many fiscal periods and may not be profitableinterests in the futureChapter 11 Proceedings that may be inconsistent with Syms’ restructuring or liquidation and business goals.
These risks and uncertainties could affect the Company’s business and operations in various ways. Because of the risks and uncertainties associated with the Chapter 11 Proceedings, Syms cannot predict or quantify the ultimate impact that eventsoccurring during the liquidation or reorganization process will have on its business, financial condition and results of operations.
We
| 7 |
| SYMS CORP. |
Among other bankruptcy risks are costs and expenses of the Chapter 11 process that may exceed the Company’s projections and diminish recoveries for creditors and shareholders; the costs and uncertainties of litigation associated with disputed claims and other bankruptcy issues; and the possibility that creditor claims against Filene’s, LLC might be determined to be, or otherwise might be treated as, liabilities of Syms and thereby reduce value available to Syms shareholders.
As a result of the Chapter 11 Proceedings, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in-possession, and subject to approval of the Court, or otherwise as permitted in the normal course of business, the Company may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in the consolidated financial statements. Further, a confirmed plan of reorganization could materially change the amounts and classifications of assets and liabilities reported in the consolidated financial statements. The historical consolidated financial statements do not include any adjustments to the reported amounts of assets or liabilities that might be necessary as a result of confirmation of a plan of reorganization.
The Company also expects that in the bankruptcy case, various claims may be asserted against it, and it cannot give any assurances that these claims will not have had a net profitmaterial adverse effect on its financial condition, results of operations or the market price of its securities.
Risks related to Current Operations
Capital market, regional and general economic conditions, especially in the retail sector, could adversely affect the value of the Company’s real estate portfolio and its results of operations and, consequently, its ability to service current debt and to pay dividends to stockholders.
The value of the real estate owned by Syms may be affected by volatility and illiquidity in the financial and credit markets and other market or economic challenges experienced by the U.S. economy or real estate industry as a whole. For instance, as a result of the economic downturn and global recession that began in the second half of 2007, demand for retail space such as that owned by Syms declined nationwide due to industry slowdowns, bankruptcies, downsizing, layoffs and cost cutting. Real estate transactions and development opportunities lessened compared to the period prior to the current economic downturn. A return to the strong real estate conditions that prevailed in the first half of 2007 is not expected in the near term, and demand for retail space such as the real estate owned by Syms may continue to be flat or decline further. Given the current economic conditions, it may be difficult to lease space, collect rent, and attract new tenants for the real estate owned by Syms, and it may become more difficult to market and sell any particular parcel of the real estate owned by Syms. Further, the cost and availability of credit may be adversely affected by, illiquid credit markets and wider credit spreads, which may adversely affect the liquidity and financial condition of Syms tenants.
The real estate owned by Syms is located predominately in the New York City metropolitan area, as well as in markets in the Southeastern section of the United States. A downturn in the economies of any these local markets could reduce demand for retail space even in the event of a general market upswing. Because the Syms portfolio consists primarily of retail space (as compared to a more diversified real estate portfolio), a decrease in demand for retail space in turn could adversely affect the value of the real estate owned by Syms.
It may be difficult to sell real estate quickly, and transfer restrictions apply to some fiscal quartersof the Company’s properties.
Real estate investments are relatively illiquid, and net losses in other fiscal quarters. We have also hadas a historyresult, Syms' ability to sell one or more parcels of both profits and losses in recent fiscal years and cannot assure youits real estate may be limited. There can be no assurance that weSyms will be profitable in the future. Even if we are able to generate profitsdispose of any particular parcel of its real estate within a stated time period or for a stated price. In addition, significant carrying costs are associated with each parcel of real property, such as insurance, real estate taxes and maintenance costs.
The Company may be unable to renew leases or relet space as leases expire.
The value of the real estate owned by Syms will depend in part on whether the future, weproperties are leased up with long term credit worthy tenants. Therefore, if current tenants decide not to renew their leases when such leases expire, Syms may have difficulty finding replacement tenants for those leases. Moreover, even if existing tenants do renew their leases or Syms can relet the space, it may not be able to retain favorable economic terms because of, among other factors, the cost of required renovations for any particular property. If Syms is unable to promptly renew the leases or relet the space at similar rates, the value of the affected real property could be adversely affected.
| 8 |
| SYMS CORP. |
The Company depends on leasing space to tenants on economically favorable terms and collecting rent from tenants who may not be able to pay.
The value of the real estate owned by Syms will depend in part on tenants' ability to remain current on their rent. If a significant number of tenants cannot pay their rent or if Syms is not able to maintain occupancy levels on favorable terms the sale value of the affected property may decline. In addition, if a tenant does not pay its rent, Syms may incur costs to enforce its rights as landlord. During economic downturns in the economy, there may be an increase in the number of tenants that cannot pay their rent and a corresponding increase in vacancy rates.
Real estate is a competitive business.
The real estate owned by Syms is located in various locations across the United States, some of which are highly competitive environments. In operating its properties, Syms will compete with a large number of property owners and developers, some of which may be willing to accept lower returns on their investments. Principal competitive factors include rents charged, attractiveness of location, the quality of the property and the breadth and quality of services provided.
The value of the real estate owned by Syms depends upon, among other factors, trends in the national, regional and local economies, financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulation, legislation and population trends.
The Company may suffer adverse consequences if its revenues decline, since its operating costs do not necessarily decline in proportion to its revenue.
Pending disposition of the real estate owned by Syms, Syms will earn a substantial majority of its income from renting its properties. Its operating costs, however, do not fluctuate in relation to changes in rental revenue. As a result, costs will not necessarily decline even if revenues do. Similarly, operating costs could increase while revenues stay flat or increase profitabilitydecline. In either such event, Syms may be forced to borrow to cover costs, it may incur losses or it may not have cash available for distributions to creditors or shareholders.
The Company relies on a quarterly or annual basis.small number of properties for a significant portion of its revenue.
The recent deteriorationCompany currently owns 18 properties, and its revenue and cash available for distribution to creditors and dividends to shareholders would be materially adversely affected if any of its properties were materially damaged or destroyed. Additionally, revenue and cash available for distribution could be materially adversely affected if tenants at these properties fail to make timely rental payments due to adverse financial conditions or otherwise default under their leases or file for bankruptcy.
The Company may be required to incur costs in generalorder to comply with various environmental laws.
Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances released at a property, and may be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation and clean-up costs incurred by the parties in connection with the contamination. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of the hazardous or toxic substances. The presence of contamination or the failure to remediate contamination may adversely affect the owner's ability to sell or lease real estate or to borrow using the real estate as collateral.
Other federal, state and local laws, ordinances and regulations require abatement or removal of asbestos-containing materials in the event of demolition or certain renovations or remodeling, the cost of which may be substantial for certain redevelopment projects that a potential purchaser would want to undertake with respect to any particular parcel of real estate owned by Syms. Such laws, ordinances and regulations also govern emissions of and exposure to asbestos fibers in the air. Federal and state laws also regulate the operation and removal of underground storage tanks. Inconnection with the ownership and management of certain properties, Syms could be held liable for the costs of remedial action with respect to these regulated substances or related claims.
| 9 |
| SYMS CORP. |
The Company is subject to risks associated with natural or other disasters.
A number of the parcels comprising the real estate owned by Syms are located in areas which could be subject to natural or other disasters, including hurricanes, severe tropical storms and tornados.
The Company is subject to potential uninsured losses and/or claims.
Syms carries comprehensive liability, fire, flood, earthquake, extended coverage and rental loss insurance on all properties, which it believes will be adequate and appropriate. There are, however, some types of losses, including lease and other contract claims, which may not be covered by insurance. If an uninsured loss or a loss in excess of insured limits occurs, such loss could have a negative impact on Syms and/or the anticipated future revenue from any particular parcel of real estate owned by Syms.
Possible terrorist activity or other acts of violence could adversely affect the Company’s financial condition and results of operations.
Future terrorist attacks in the United States or other acts of violence may result in declining economic conditionsactivity, which could harm the demand for goods and services offered by Syms tenants and the impact onvalue of its properties. Such a resulting decrease in retail demand could make it difficult for Syms to renew, re-lease or sell Syms properties.
Terrorist activities or violence also could directly affect the value of the Company’s properties through damage, destruction or loss, and the availability of insurance for such acts, or of insurance generally, might be lower or cost more, which could increase Syms' operating expenses and adversely affect its financial condition and results of operations. To the extent that Syms' tenants are affected by future attacks, their businesses similarly could be adversely affected, including their ability to continue to meet obligations under their existing leases. These acts might erode business and consumer confidence and consumer spending could materially and might result in increased volatility in national and international financial markets and economies. Any one of these events might decrease demand for real estate and decrease or delay the occupancy of Syms' new or redeveloped properties.
Inflation or deflation may adversely impact ouraffect the Company’s financial condition and results of operations in future periods.operations.
Consumer spending habits, including spending for our merchandise, are affected by, among other things, prevailing market conditions, levels of employment, salary and wage rates, prevailing interest rates, income tax rates and policies, consumer confidence and consumer perception of general economic conditions. Recently, as a result of the significant deterioration in economic conditions worldwide, consumer confidence and consumer spending have been negatively impacted and could remain depressed for an extended period of time. Consumer purchases of discretionary items, including our merchandise, can be expected to decline during periods when disposable income is adversely affected or there is economic uncertainty.
We may be unable to compete favorably in our highly competitive markets
The retail apparel business is highly competitive and we only account for a small fraction of the total market for men’s, women’s and children’s apparel. We compete against discount stores, specialty apparel stores, department stores, manufacturer-owned factory outlet stores and others. Our success depends on our ability to remain competitive with respect to style, price, brand availability and customer service. The performance of our competitors, as well as changes in their pricing policies, marketing activities and other business strategies,Increased inflation could have a material effectpronounced negative impact on Syms' general and administrative expenses, as these costs could increase at a rate higher than Syms' rents. Conversely, deflation could lead to downward pressure on rents and other sources of income.
The Company may incur significant costs complying with the Americans with Disabilities Act and similar laws.
Syms' properties may be subject to risks relating to current or future laws, including laws benefiting disabled persons, and other state or local zoning, construction or other regulations. These laws may require significant property modifications in the future. Noncompliance with these laws could result in fines being levied against Syms. The occurrence of any of these events could have an adverse impact on our business,cash flows and ability to make timely distributions.
Under the Americans with Disabilities Act, (the “ADA”), all public accommodations must meet federal requirements related to access and use by disabled persons. Additional federal, state and local laws also may require modifications to Syms' properties, or restrict Syms ability to renovate its properties. If one or more of Syms' properties is not in compliance with the ADA or other legislation, then Syms may be required to incur additional costs to bring the property into compliance with the ADA or similar state or local laws.
Syms cannot predict the ultimate amount of the cost of compliance with the ADA or other legislation. If Syms incurs substantial costs to comply with the ADA and any other legislation, our financial condition, results of operations and our market share.
If we are unable to meet certain financial covenants in our credit facility, ourcash flow and/or ability to borrow could be constrained
We had $8.4 million in borrowings as of the end of the current fiscal year undersatisfy our existing credit agreement. The facility contains financial covenants with respect to consolidated tangible net worth, as well as other financial ratios. If in the future we continue to borrow monies under the facility and fail to meet these covenants or obtain appropriate waivers, our lender may terminate the credit facility or accelerate any then-existing debt.
Our sales and operating results depend on consumer preferences and fashion trends
Our sales and operating results depend in part upon our ability to anticipate and respond to product and fashion trends as well as to anticipate, gauge and react to changing consumer demands in a timely manner. There can be no assurance that the merchandise on hand or on order will correspond to changes in taste and demand or that we will be able to successfully secure and market merchandise that is responsive to such trends. Consumer demand requires us to anticipate and respond to numerous and fluctuating variables in fashion trends and other conditions in the markets in which our stores are situated. A variety of factors may affect our ability to maintain the proper mix of products in each store, including without limitation: variations in local, regional or national economic conditions which could affect our customers’ discretionary spending, unanticipated fashion trends, our success in distributing merchandise to our stores in an efficient manner and changes in weather patterns, which in turn may affect consumer demand and preferences. If we misjudge the market for our products, or if we are unable to anticipate and fulfill the merchandise needs of each region, we may experience decreases in our sales, we may realize significant excess inventories for some products and we may be forced to increase markdowns in relation to slow-moving merchandise, which could have a material adverse effect on our business, financial condition and results of operations.
If we are unable to renew or enter into new leases on favorable terms, our revenue growth may decline
34 of our 53 locations are located in leased premises. The leases for twelve of these 34 locations expire by 2011 and are subject to extension or renewal. If the cost of leasing existing stores increases, we cannot assure you that we will be able to maintain our existing store locations as leases expire. In addition, we may not be able to enter into new leases on favorable terms or at all, or we may not be able to locate suitable alternative sites or additional new sites for new stores in a timely manner. Our revenues and earnings may decline if we fail to maintain existing store locations, enter into more costly new leases, locate alternative sites on more expensive terms or fail to find suitable additional sites for new stores.
Our results of operations depend on keeping our expenses at an appropriate level
Our performance depends on appropriate management of our expense structure, including our selling, general and administrative costs. If we fail to meet our expense goals or appropriately reduce expenses during a weak sales season or period, our results of operations could be materially adversely affected.
Our relationships with vendors can change
We currently purchase first-quality, in-season designer and brand name merchandise from more than 200 vendors at prices believed to be below those generally available to major department and specialty stores. Although we have maintained long-term business relationships with many of these vendors, there can be no assurance that we will be able to continue to purchase first-quality, in-season merchandise from these vendors in the same breadth of styles and sizes, in the same or greater volumes and at prices as favorable as those currently available to us. If we fail to maintain our relations with our existing vendors, or to enhance the quality of merchandise they supply us or if we cannot maintain existing sources of supply or attract new vendors of in-season brand name and designer merchandise, our ability to obtain a sufficient amount and variety of merchandise at favorable prices may be limited, which could have a significant negative impact on our competitive position and our results of operations could be materially and adversely affected.
Our ability to manage inventory can affect our business
The fashion-oriented nature of our products and the rapid changes in customer preferences leave us vulnerable to an increased risk of inventory obsolescence. Our ability to manage inventories properly is an important factor in our operations. Inherent in our management and valuation of inventories are certain significant judgments and estimates, including, among others, initial merchandise markup and subsequent markups and markdowns which significantly impact the ending inventory valuation at retail as well as the resulting cost complement. While management believes that these methods provide an inventory valuation which reasonably approximates cost, if market conditions are less favorable than those projected, additional markdowns may be required. If we are unable to effectively manage inventory, our business, financial condition and results of operations could be materially adversely affected.
Our failure to retain our existing senior managementdebt service obligations and to continue to attract qualified new personnel could adversely affect our business
Our success will depend on our ability to retain our key personnel and attract and retain talented, highly qualified executives. If we were to lose the benefit of the experience, efforts and abilities of any of our key executive and buying personnel, our businessmake distributions could be adversely affected. Furthermore, our success is also dependent on our ability to hire and train qualified retail management and associates. We are also subject to risks associated with any significant disruptions in our relationship with our employees, including union employees and any work stoppages by our employees, including union employees.
| 10 |
| SYMS CORP. |
We are subject to potential uninsured losses and/or claims
We are subject to the possibility of uninsured losses from risks such as terrorism, earthquakes or floods, for which no, or limited, insurance coverage is maintained. We are also subject to risk of losses which may arise from adverse litigation results or other claims.
We may be required to recognize additional impairment charges
Pursuant to accounting principles generally accepted in the United States, we are required to periodically assess our long-lived assets to determine if they are impaired. Business disruptions, protracted economic weakness, declines in operating results and other factors may result in asset impairments. During the annual impairment testing for the fiscal year ended February 27, 2010, the carrying amount of certain real estate holdings exceeded the implied fair values and as a result the Company recognized an impairment charge of $80,000. In fiscal 2008 we recorded an impairment charge of $530,000. In light of current economic conditions, additional impairments could occur in future periods whether or not connected to the current impairment analysis. Future impairment charges could materially and adversely affect our reported
earnings in the periods of such charges and could materially and adversely affect our financial condition and results of operations.
Changes in governmental regulation could adversely affect our operationsthe Company’s operations.
Laws and regulations at both state and federal levels frequently change and the ultimate cost of compliance cannot be precisely estimated. In addition, we cannot predict the impact that may result from the changes in governmental regulation under different political administrations. Changes in regulations, the imposition of additional regulations, or the enactment ofnew legislation that impacts employment, labor, trade, transportation or logistics, health care, tax or environmental issues could have a material adverse impact on our financial condition or results of operations.
A privacy breach could adversely affect or business
The protection of customer, employee and company data is critical. The regulatory environment surrounding information security and privacy is demanding, with the frequent imposition of new and changing requirements. In addition, customers have a high expectation that we will adequately protect their personal information. A significant breach of customer, employee or company data could damage our reputation, result in lost sales, fines or lawsuits or have a material adverse impact on our financial condition or results of operations.
Other factors could affect our results of operations and our ability to growItem 1B. UNRESOLVED STAFF COMMENTS
Other factors that could cause actual results to differ materially from those predicted and that may adversely affect our ability to grow include: possible disruptions in our computer or telephone systems, increases in labor costs, higher than anticipated store closings or relocation costs, increases in energy costs, higher interest rates, potential disruptions in the supply of or restrictions on imported merchandise, unanticipated difficulties associated with integrating Filene’s Basement and Syms and unanticipated increases in merchandise or occupancy costs.
|
None.
|
Item 2. PROPERTIES
At February 27, 201025, 2012, the Company had 53 operatinghas only owned locations. These locations include both owned and leased properties and include retail stores and ancillary operations (consisting of receiving, inspection and administrative functions), warehouse and offices, plus additional space incidental to core operations which is, whenever practicable, leased to third parties. The following table is a listing of operatingthese locations and respective square footage usage:footage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location |
| Lease |
| Total |
| Retail & |
| Warehouse |
| Additional |
| |||||
|
|
|
|
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fairfield, CT |
|
| Own(1) |
|
| 43,000 |
|
| 43,000 |
|
| — |
|
| — |
|
Hartford, CT |
|
| Lease |
|
| 38,000 |
|
| 38,000 |
|
| — |
|
| — |
|
Ft Lauderdale, FL |
|
| Own |
|
| 55,000 |
|
| 55,000 |
|
| — |
|
| — |
|
Kendall, FL |
|
| Lease |
|
| 40,000 |
|
| 40,000 |
|
| — |
|
| — |
|
Miami, FL |
|
| Own |
|
| 53,000 |
|
| 53,000 |
|
| — |
|
| — |
|
Tampa, FL |
|
| Own |
|
| 77,000 |
|
| 48,000 |
|
| — |
|
| 29,000 | (a) |
West Palm Beach, FL |
|
| Own |
|
| 112,000 |
|
| 54,000 |
|
| — |
|
| 58,000 | (b) |
Atlanta, GA |
|
| Own |
|
| 69,000 |
|
| 69,000 |
|
| — |
|
| — |
|
Marietta, GA |
|
| Own |
|
| 77,000 |
|
| 48,000 |
|
| — |
|
| 29,000 | (b) |
Addison, IL |
|
| Own |
|
| 68,000 |
|
| 68,000 |
|
| — |
|
| — |
|
Niles, IL |
|
| Lease |
|
| 37,000 |
|
| 37,000 |
|
| — |
|
| — |
|
Rockville, MD |
|
| Own |
|
| 71,000 |
|
| 71,000 |
|
| — |
|
| — |
|
Norwood, MA |
|
| Lease |
|
| 43,000 |
|
| 43,000 |
|
| — |
|
| — |
|
Southfield, MI |
|
| Own |
|
| 60,000 |
|
| 50,000 |
|
| — |
|
| 10,000 | (c) |
Cherry Hill, NJ |
|
| Own |
|
| 150,000 |
|
| 66,000 |
|
| 39,000 |
|
| 45,000 | (c) |
Paramus, NJ |
|
| Own |
|
| 77,000 |
|
| 73,000 |
|
| — |
|
| 4,000 | (d) |
Secaucus, NJ |
|
| Own(2) |
|
| 340,000 |
|
| 29,000 |
|
| 311,000 |
|
| — |
|
Woodbridge, NJ |
|
| Lease |
|
| 36,000 |
|
| 36,000 |
|
| — |
|
| — |
|
Buffalo, NY |
|
| Own |
|
| 102,000 |
|
| 46,000 |
|
| — |
|
| 56,000 | (a) |
Elmsford, NY |
|
| Own(3) |
|
| 143,000 |
|
| 59,000 |
|
| — |
|
| 84,000 | (d) |
New York, NY |
|
| Lease |
|
| 64,000 |
|
| 64,000 |
|
| — |
|
| — |
|
New York, NY |
|
| Own |
|
| 57,000 |
|
| 57,000 |
|
| — |
|
| — |
|
Westbury, NY |
|
| Own |
|
| 92,000 |
|
| 92,000 |
|
| — |
|
| — |
|
King of Prussia, PA |
|
| Own |
|
| 69,000 |
|
| 55,000 |
|
| — |
|
| 14,000 | (a) |
Houston, TX |
|
| Own |
|
| 42,000 |
|
| 42,000 |
|
| — |
|
| — |
|
Plano, TX |
|
| Lease |
|
| 40,000 |
|
| 40,000 |
|
| — |
|
| — |
|
Falls Church, VA |
|
| Lease |
|
| 49,000 |
|
| 49,000 |
|
| — |
|
| — |
|
Aventura, FL |
|
| Lease |
|
| 42,000 |
|
| 42,000 |
|
| — |
|
| — |
|
Chicago, IL |
|
| Lease |
|
| 61,000 |
|
| 61,000 |
|
| — |
|
| — |
|
Chicago, IL |
|
| Lease |
|
| 63,000 |
|
| 63,000 |
|
| — |
|
| — |
|
Boston, MA |
|
| Lease |
|
| 38,000 |
|
| 38,000 |
|
| — |
|
| — |
|
Newton, MA |
|
| Lease |
|
| 48,000 |
|
| 48,000 |
|
| — |
|
| — |
|
Watertown, MA |
|
| Lease |
|
| 33,000 |
|
| 33,000 |
|
| — |
|
| — |
|
Peabody, MA |
|
| Lease |
|
| 44,000 |
|
| 44,000 |
|
| — |
|
| — |
|
Braintree, MA |
|
| Lease |
|
| 38,000 |
|
| 38,000 |
|
| — |
|
| — |
|
Saugus, MA |
|
| Lease |
|
| 31,000 |
|
| 31,000 |
|
| — |
|
| — |
|
Rockville, MD |
|
| Lease |
|
| 38,000 |
|
| 38,000 |
|
| — |
|
| — |
|
Lockwood, MD |
|
| Lease |
|
| 31,000 |
|
| 31,000 |
|
| — |
|
| — |
|
Paramus, NJ |
|
| Lease |
|
| 51,000 |
|
| 51,000 |
|
| — |
|
| — |
|
Manhasset, NY |
|
| Lease |
|
| 48,000 |
|
| 48,000 |
|
| — |
|
| — |
|
Flushing, NY |
|
| Lease |
|
| 29,000 |
|
| 29,000 |
|
| — |
|
| — |
|
New York, NY |
|
| Lease |
|
| 42,000 |
|
| 42,000 |
|
| — |
|
| — |
|
New York, NY |
|
| Lease |
|
| 90,000 |
|
| 90,000 |
|
| — |
|
| — |
|
New York, NY |
|
| Lease |
|
| 55,000 |
|
| 55,000 |
|
| — |
|
| — |
|
Columbus, OH |
|
| Lease |
|
| 71,000 |
|
| 71,000 |
|
| — |
|
| — |
|
Warrensville, OH |
|
| Lease |
|
| 38,000 |
|
| 38,000 |
|
| — |
|
| — |
|
Washington, DC |
|
| Lease |
|
| 38,000 |
|
| 38,000 |
|
| — |
|
| — |
|
Washington, DC |
|
| Lease |
|
| 45,000 |
|
| 45,000 |
|
| — |
|
| — |
|
Washington, DC |
|
| Lease |
|
| 43,000 |
|
| 43,000 |
|
| — |
|
| — |
|
Atlanta, GA |
|
| Lease |
|
| 49,000 |
|
| 49,000 |
|
| — |
|
| — |
|
Burlington, MA |
|
| Lease |
|
| 36,000 |
|
| — |
|
| 36,000 |
|
| — |
|
Auburn, MA |
|
| Lease |
|
| 457,000 |
|
| — |
|
| 457,000 |
|
| — |
|
Landover, MD |
|
| Lease |
|
| 22,000 |
|
| — |
|
| 22,000 |
|
| — |
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
| 3,685,000 |
|
| 2,491,000 |
|
| 865,000 |
|
| 329,000 |
|
|
|
|
|
|
|
|
|
| ||||||||
| Total | ||||||||
| Square | ||||||||
| Location | Notes | Feet | ||||||
| Fairfield, CT | (1) | 43,000 | ||||||
| Ft. Lauderdale, FL | 55,000 | |||||||
| Miami, FL | 53,000 | |||||||
| West Palm Beach, FL | 112,000 | |||||||
| Marietta, GA | 77,000 | |||||||
| Norcross, GA | 69,000 | |||||||
| Addison, IL | 68,000 | |||||||
| Southfield, MI | 60,000 | |||||||
| Cherry Hill, NJ | 150,000 | |||||||
| Paramus, NJ | 77,000 | |||||||
| Secaucus, NJ | (2) | 340,000 | ||||||
| Elmsford, NY | (3) | 59,000 | ||||||
| New York, NY | 57,000 | |||||||
| Westbury, NY | 92,000 | |||||||
| Williamsville, NY | 102,000 | |||||||
| Berwyn, PA | 69,000 | |||||||
| Houston, TX | 42,000 | |||||||
| 1,525,000 | ||||||||
(1) | Ground lease dated June 2, 2003 expiring November 3, 2036. |
(2) | Ground lease dated June 1, 1977 expiring May 31, 2276. |
(3) | Ground lease dated January 1, 1969 and January 1, 1970 expiring May 31, 2068 |
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Syms stores are typically “free-standing” or located in shopping centers and have available adequate free parking. Certain stores in New York, Boston, Chicago, Atlanta and Washington, D.C. are located in key urban areas and are convenient to mass transit. Syms suburban locations are usually near major highways or thoroughfares in localities of at least 1,000,000 people. In some higher population densities, Syms has more than one store in the same vicinity.
Lease TermsItem 3. LEGAL PROCEEDINGS
Thirty-four of the Company’s 53 locations are leased from unrelated third parties on varying remaining terms with varying option periods. Certain option periods may be based on formulas contained in existing leases or may be based on negotiations between the parties. The following table summarizes the number of leases expiring in each calendar period; the number of such leases with renewal options; and the number of years of each option period.
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| Range in Years |
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| 2010 |
| 5 |
| 0 |
| — |
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| 2011 |
| 4 |
| 3 |
| 5 years |
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| 2012 |
| 3 |
| 3 |
| 5 years |
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| 2013 |
| 1 |
| 1 |
| 10 years |
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| 2014 |
| 1 |
| 0 |
| — |
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| 2015 & thereafter | 20 |
| 10 |
| 5-10 years |
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Store leases provide for a base rental of between $3.88 and $103.52 per square foot. In addition, under the “net” terms of all leases, the Company pays maintenance expenses, real estate taxes and other charges. Five leases provide for rent payments based on a percentage of sales above certain thresholds. Minimum rental payments for leased locations aggregated approximately $27,060,000 and $6,581,000 for fiscal 2009 and 2008, respectively.
Whenever practicable, space not necessary for Company operations is offered for rent by the Company. Of the ten operating locations with available rental space, five are fully rented, two (which are multi-tenant strip malls) are partially rented and three are currently vacant. Rental income for tenanted locations, net of administrative and operating expenses of $419,000 and $512,000 in fiscal 2009 and 2008, respectively, was $2,373,000 and $2,026,000 for fiscal 2009 and 2008 respectively. Tennant leases expire at various dates during 2011 through 2047 with various option terms and periods extending to 2097.
Store Openings/Closings
In fiscal 2009, the Company closed Syms stores in Towson, MD, Hurst, TX, Commack, NY, Cranston, RI, and Peabody, MA. No new stores were opened during fiscal 2009. A new lease, replacing our space in Falls Church, Virginia was executed with an inception date of June, 2009. Another new lease, for new space to expand the size of the Filene’s Broadway (New York) store, was executed with an inception date of January, 2010.
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The Company is a party to routine litigation incidentlegal proceedings incidental to its former business. Some of the actions to which the Company is a party are covered by insurance and are being defended or reimbursed by the Company’s insurance carriers. Additionally, as discussed in Part I, the Company and its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware. Additional information regarding this filing was reported in the Company’s current reports on Form 8-K, filed with the SEC on November 2, 2011 and November 23, 2011, which are hereby incorporated by reference.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
| SYMS CORP. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED |
On November 4, 2011, the Company received notice from the NASDAQ Listing Qualifications Staff stating that the Staff has determined that the Company’s securities would be delisted from the NASDAQ Stock Market InformationLLC (the “NASDAQ”).
The decision was reached by the Staff under NASDAQ Listing Rules 5101, 5110 (b) and IM-5101-1 following the Company’s announcement on November 2, 2011 that it and each of its subsidiaries filed a petition for protection under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Syms stock was delisted by NASDAQ prior to the market opening on November 15, 2011. NASDAQ filed Form 25-NSE with the SEC removing the Company’s securities from listing and registration on the NASDAQ. Effective November 15, 2011, the Company’s stock began trading on the OTCQB marketplace (the “Pink Sheets”), trading symbol SYMSQ.PK. Prior to November 15, 2011, stock traded on NASDAQ, under the symbol SYMS.Operated by OTC Markets Group Inc., the OTCQB is a market tier for OTC traded companies that are registered and reporting with the SEC.
Trading in stock or options of the Company is restricted by order of the United States Bankruptcy Court for the District of Delaware.
The following table summarizes the quarterly high and low bid quotations prices per share of the Common Stock as reported on the Pink Sheets since November 15, 2011 and by the high and low sales prices on NASDAQ prior to the date trading was suspended by NASDAQ. The Pink Sheet quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
| Year ended February 25, 2012 | Year ended February 26, 2011 | |||||||||||||||
| High | Low | High | Low | |||||||||||||
| First Quarter | $ | 10.20 | $ | 6.45 | $ | 10.68 | $ | 6.80 | ||||||||
| Second Quarter | 12.99 | 8.40 | 7.84 | 7.00 | ||||||||||||
| Third Quarter | 10.45 | 5.64 | 8.49 | 6.91 | ||||||||||||
| Fourth Quarter | 12.80 | 8.10 | 7.31 | 6.11 | ||||||||||||
Holders
As of May 10, 2012, there were approximately 304record holders of the Common Stock, par value $0.05 per share (the “Common Stock”).
Dividends
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| Year ended February 27, 2010 |
| Year ended February 28, 2009 |
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First Quarter |
| $ | 8.61 |
| $ | 4.22 |
| $ | 16.48 |
| $ | 10.38 |
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Second Quarter |
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| 8.57 |
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| 5.90 |
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| 17.86 |
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| 12.33 |
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Third Quarter |
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| 8.29 |
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| 6.57 |
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| 17.24 |
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| 7.30 |
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Fourth Quarter |
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| 10.00 |
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| 7.00 |
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| 10.80 |
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| 5.38 |
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No dividends were paid in fiscal | |
Performance Graph
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Below is a graph comparing the cumulative total shareholders’ return on the Common Stock for the last five fiscal years (beginning | |
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| 12 |
| SYMS CORP. |
Item 6. SELECTED FINANCIAL DATA
The selected financial data presented below has been derived from the Company’s audited financial statements for the eight months ended October 29, 2011, and the fiscal years ended February 26, 2011, February 27, 2010, February 28, 2009 and March 1, 2008, March 3, 2007 and February 25, 2006.2008. The selected financial data presented below should be read in conjunction with such financial statements and notes thereto.
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| February 27, |
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| March 1, |
| March 3, |
| February 25 |
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Income statement data: |
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Net sales |
| $ | 377,309 |
| $ | 242,000 |
| $ | 267,149 |
| $ | 281,178 |
| $ | 280,389 |
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Net income (loss) from operations (2) |
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| (4,842 | ) |
| (3,993 | ) |
| 2,225 |
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| 14,064 |
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| 5,275 |
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Net income (loss) |
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| 8,308 |
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| (3,423 | ) |
| 807 |
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| 9,548 |
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| 3,436 |
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Net income (loss) per share – basic |
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| 0.57 |
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| (0.23 | ) |
| 0.06 |
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| 0.66 |
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| 0.23 |
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Dividends paid |
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| — |
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| — |
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| 8,820 |
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| — |
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| 15,028 |
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Net income (loss) per share – diluted |
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| 0.57 |
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| (0.23 | ) |
| 0.05 |
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| 0.65 |
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| 0.23 |
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Balance sheet data: |
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Working capital |
| $ | 52,798 |
| $ | 43,215 |
| $ | 57,090 |
| $ | 67,431 |
| $ | 81,832 |
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Total assets |
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| 269,079 |
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| 215,123 |
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| 229,629 |
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| 239,559 |
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| 239,119 |
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Long-term liabilities |
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| 11,418 |
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| 840 |
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| 1,178 |
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| 1,548 |
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| 1,520 |
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Shareholders’ equity |
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| 195,032 |
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| 186,043 |
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| 192,135 |
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| 202,069 |
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| 210,534 |
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Eight Months Ended October 29, 2011(1) | Fiscal Year Ended February 26, 2011 | Fiscal Year Ended February 27, 2010(2) | Fiscal Year Ended February 28 2009 | Fiscal Year Ended March 1, 2008 | ||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||
| Statement of Operations data: | ||||||||||||||||||||
| Net sales | $ | 258,214 | $ | 445,133 | $ | 377,309 | $ | 242,000 | $ | 267,149 | ||||||||||
| Net (loss) income from operations(3) | (28,561 | ) | (50,380 | ) | (4,842 | ) | (3,993 | ) | 2,225 | |||||||||||
| Net (loss) income | (76,027 | ) | (32,857 | ) | 8,308 | (3,423 | ) | 807 | ||||||||||||
| Net (loss) income per share – basic | $ | (5.26 | ) | (2.27 | ) | 0.57 | (0.23 | ) | 0.06 | |||||||||||
| Dividends paid | - | - | - | - | 8,820 | |||||||||||||||
| Net (loss) income per share – diluted | $ | (5.26 | ) | (2.27 | ) | 0.57 | (0.23 | ) | 0.05 | |||||||||||
| Balance Sheet data: | ||||||||||||||||||||
| Working capital | Not Applicable | $ | 31,563 | $ | 52,798 | $ | 43,215 | $ | 57,090 | |||||||||||
| Total assets | Not Applicable | 270,774 | 269,079 | 215,123 | 229,629 | |||||||||||||||
| Long-term liabilities | Not Applicable | 41,421 | 11,418 | 840 | 1,178 | |||||||||||||||
| Shareholders’ equity | Not Applicable | 160,979 | 195,032 | 186,043 | 192,135 | |||||||||||||||
(1) Reflects eight months of activity through October 29, 2011, the end of the fiscal month closest to the date on which the Company filed voluntary petitions for reorganization under Chapter 11 and subsequent to which has been reporting under the liquidation basis of accounting. Amounts are not comparable to prior fiscal years.
(2) Reflects the acquisition by the CompanyFilene’s, LLC on June 19,18, 2009 of certain real property leases, inventory, other property, equipment and other assets of Filene’s Basement, Inc. pursuant to an auction conducted in accordance with § 363 of the Federal Bankruptcy Code. The acquisition has been accounted for as a purchase. See Note 6 of the Notes7 to the Company’s Consolidated Financial Statements.
(2)
| 13 |
| SYMS CORP. |
(3) Fiscal 2009 (the year ended February 27, 2010) includes a gainof $24.8 million from the receipt of insurance proceeds from officers’ life insurance policies on the life of the Company’s founder who died on November 17, 2009 and a bargain purchase gain of $9.7 million attributable to the acquisition of Filene’s.assets from Filene’s, Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Special Note Regarding Forward-Looking Statements
This Annual Report (including but not limited to factors discussed below, in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as those discussed elsewhere in this Annual Report on Form 10-K) may include certainreport includes forward-looking statements (within the meaning of SectionsSection 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934) and information relating to the Company that are based on the beliefs of the management of the Company as well as assumptions made by and information currently available to the management of the Company. When used in this 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;others general economic and market conditions, decreased consumer demand for the Company’s products, possible disruptions in the Company’s computerinformation or telephonecommunication systems, possible work stoppages or increases in labor costs, effects of competition, possible disruptions or delays in the opening of new stores or inability to obtain suitable sites for new stores, higher than anticipated store closings or relocation costs, higher interest rates, unanticipated increases in merchandise or occupancy costsdifficulties which may arise with respect to the Company and other factors which may be outside the Company’s control, including the risk factors disclosed in Item 1A of this Annual Report on Form 10-K.control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described herein as anticipated, believed, estimated, expected, intended or planned. Subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements in this paragraph and elsewhere described elsewhere in this Annual Report and other reports filed with the SecuritiesSEC.
On November 2, 2011, Syms and Exchange Commission.
The Company does not assumeits subsidiaries filed voluntary petitions for relief under Chapter 11 of the obligation to update any forward-looking statement. Shareholders should carefully evaluate such statements in light of factors, including risk factors, describedUnited States Code (“Bankruptcy Code” or “Chapter 11”) in the United States Bankruptcy Court (“Court”) for the District of Delaware.
Disposition of the Company’s filings withand Filene’s Businesses
Prior to November 2, 2011, all of the SEC, especially on Forms 10-K, 10-QCompany’s and 8-K. In Item 1A., “Risk Factors”Filene’s business operations consisted primarily of this Annual Report on Form 10-K,running retail operations. As the economy worsened, sales continued to erode and, as a result, cash flow suffered. Notwithstanding the best efforts of the Company discussesand Filene’s, significant operational losses continued to threaten the on-going businesses. Trade vendors tightened and/or ceased credit terms. As a result, the Company and Filene’s projected that absent additional financing or measures to monetize certain assets, liquidity would come to an end.
In response to the Chapter 11 filing the Company implemented the liquidation basis of accounting effective on October 30, 2011, which was the beginning of the fiscal month closest to the petition date. Net operating results from October 30, 2011 to November 1, 2011 were not material. The liquidation basis of accounting is appropriate when the liquidation of a company appears imminent and the net realizable value of its assets is reasonably determinable. Accordingly the Company implemented the liquidation basis of accounting on October 30, 2011. Under this basis of accounting, assets and liabilities are stated at their net realizable value and estimated costs through the liquidation date are provided to the extent reasonably determinable.
The consolidated financial statements for the period ended February 26, 2011 and February 27, 2010 were prepared on the going concern basis of accounting, which contemplated realization of assets and satisfaction of liabilities in more detail various important risk factors that could cause actual resultsthe normal course of business. In the opinion of management, the accompanying Consolidated Statements of Operations, Shareholders’ Equity and Cash Flows contain all adjustments, including normal recurring adjustments, necessary to differ from expected or historic results. Thepresent fairly the financial position of the Company notes these factors for readers as permitted by the Private Securities Litigation Reform Act of 1995. Shareholders should understand that it is not possible to predict or identify all such factors. Consequently, shareholders should not consider any such list to be a complete statement of all potential risks or uncertainties.February 26, 2011 and February 27, 2010.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in the financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from the Company’s estimates. Such differences could be material to the financial statements.
| 14 |
| SYMS CORP. |
The Company believes that its application of accounting policies, and the estimates inherently required by the policies, are reasonable. These accounting policies and estimates are constantly reevaluated periodically, and adjustments are made when facts and circumstances dictate a change. Historically, the Company has found the application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.
The Company’s accounting policies are more fully described in Note 1 to the Financial Statements presented elsewhere in this Annual Report.
The Company has identified certain critical accounting policies that applied to the Company’s financial reporting until the adoption of the liquidation basis of accounting on October 30, 2011. These policies are described below.
Merchandise InventoryInventory – Inventory isMerchandise 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. Under the retail method, inventory cost and the resulting gross margins are calculated by applying a cost to retail ratio between the costs of goods available for sale and the retail value of inventories. For a brief period, from October 4, 2009 through October 2, 2010, the Syms stores utilized a different method, the moving weighted average cost method for Syms and the lower of cost or market, first in, first out (“FIFO”) retail method for Filene’s.method. Under the moving weighted average cost method, inventory cost and the resulting gross margins are calculated by applying an average cost based on the cost of goods available for sale divided by the number of units available for sale. UnderAfter the FIFO retailCompany completed the acquisition of certain assets of Filene’s Basement Inc., the Company found itself in the position that a portion of its business was utilizing the moving average cost method inventory cost and the resulting gross margins are calculated by applying a cost to retail ratio between the costsportion of goods available for sale andits business was utilizing the retail valueinventory method.
The Company thus was faced with the choice of inventories.either converting Filene’s to the moving average cost method or transitioning the Syms stores back to the system that they had previously utilized. The significant estimates used are for markdowns and shrinkage. PriorCompany determined that it would be more effective to October 4, 2009, all of the Company’s inventories were stated at first in, first out as determined byrevert back to the retail inventory method. The change in the method of recording Syms inventory in the currentthird quarter of fiscal year2009 and the third quarter of fiscal 2010 did not have a material impact on reported results of operations. The significant estimates used are for markdowns and shrinkage.
Factors considered in the determination of permanent markdowns include current and anticipated demand, customer preferences, and age of the merchandise, fashion trends and weather conditions. In addition, inventory is also evaluated against corporate pre-determined historical markdown trends. When a decision is made to permanently markdown merchandise, the resulting gross margin reduction is recognized in the period the markdown is recorded. The timing of the decision, particularly surrounding the balance sheet date, can have a significant effect on the results of operations.
Shrinkage is estimated as a percentage of sales for the period from the date of the last physical inventory to the end of the fiscal year. Physical inventories are taken at least annually for all stores and inventory records are adjusted accordingly. The shrinkage rate from the most recent physical inventory, in combination with historical experience, is used as the standard for the shrinkage accrual following the physical inventory.
The Company has found the use of these estimates to be appropriate and actual results have not differed materially. However, the Company is subject to certain risks and uncertainties that could cause its future estimates to differ materially from past experience.
Long-Lived Assets- In evaluating and measuring an impairment loss, the evaluationCompany considers individual retail locations to be the appropriate asset group, since the store level is the lowest level at which identifiable cash flows are independent of the fair value and future benefits and any potential impairment of long-lived assets, the Company performs analyses of the anticipated undiscounted future net cash flows of other assets and liabilities.
The Company evaluates long-lived assets for impairment at all of our retail locations on at least an annual basis at the related long-lived assets. Ifend of each fiscal year, after the carrying valueholiday selling season, when the Company has the most visibility into the operations of the relatedindividual store. The Company will also test an asset exceedsgroup for impairment during the year if any impairment indicators are identified that could result in a potential impairment.
If it is determined that such indicators are present and the review discloses that the assets will not be fully recoverable, based on undiscounted estimated cash flows over the Company reduces theremaining useful lives, their carrying valuevalues are reduced to itsestimated fair value, which is generally calculated using discounted cash flows.value. Various factors, including future sales
growth and profit margins, are included in this analysis. To the extent these future projections or the Company’s strategies change, the conclusion regarding impairment may differ from the Company’s current estimates.
Deferred Tax Valuation Allowance –The Company has considered future taxable income and ongoing prudent and feasible tax planning strategies that could produce additional future taxable income in assessing the need for a valuation allowance. Should the Company determine
| 15 |
| SYMS CORP. |
Based on management’s assessment, it is more likely than not that, itfor federal and state purposes, deferred tax assets will not be able to realize allrealized by future taxable income or parttax planning strategies. A net valuation allowance of our net deferred tax assetapproximately $46,518,000 was recorded during the eight-month period ended October 29, 2011. Further valuation allowance of approximately $38,599,000 was recorded in the future, an adjustment to the deferred tax asset will be charged to income in thesubsequent period such determination is made.from October 30, 2011 through February 25, 2012.
Results of Operations
The following discussion compares the fiscal yearseight months ended October 29, 2011 and the twelve months ended February 26, 2011 and February 27, 2010. Both February 26, 2011 and February 27, 2010 February 28, 2009 and March 1, 2008. All of the fiscal years were comprised of 52 weeks.
Comparison of the Eight Months Ended October 29, 2011 (Fiscal 2011) Compared to Twelve Months Ended February 26, 2011 (Fiscal 2010)
The Company adopted the liquidation basis of accounting effective October 30, 2011 and accordingly reported no revenue from the sale of merchandise, no cost of goods sold and no operating expenses thereafter. As a result the amounts reported for fiscal 2011 and fiscal 2010 are not comparable.
Sales for the eight months ended October 29, 2011 were $258.2 million versus $445.1 million for the twelve-month period ended February 26, 2011. Sales volume for the eight months ended October 29, 2012, was impacted by the fact that Gordon Brothers undertook the liquidation of five stores (Rockville Pike, MD; Watertown, MA; Peabody, MA; Braintree, MA and Saugus, MA) for approximately 18 days during the period.
By merchandise category, our Women’s business grew to 47% of total Company net sales from 46% in the prior year and Shoes business grew to 6% from 5% last year. Shoes increased partially due to the introduction of DSW into seven Syms locations during the third quarter of fiscal 2011. These increases came at the expense of Men’s business which decreased to 37% of total Company net sales from 38% last year, and Domestics business which declined slightly to 5% from 6% last year. Children’s apparel did not change, remaining at 5% of total company net sales.
Gross profit was $100.2 million, or 38.8% of net sales, for the eight months ended October 29, 2011 compared with $173.8 million, or 39.0% of sales, for the twelve months ended February 26, 2011. This decrease as a percent of net sales was due primarily to lower inventory levels compared to the prior year, higher levels of markdowns in the current year, increased advertising and promotions to generate sales as well as the impact of the five store liquidation run by Gordon Brothers that started mid October 2011.
The Company’s gross profit excludes the cost of its distribution network. For the eight months ended October 29, 2011 and the twelve months ended February 26, 2011, the amounts incurred for our distribution network that were classified in selling, general and administrative expenses and occupancy costs were $9.5 million and $19.0 million, respectively.
Selling, general and administrative expense (“SG&A”) for the eight-month period ended October 29, 2011 were $76.1 million, or 29.5% of net sales, compared to $124.4 million, or 27.9% of net sales, for the twelve month period ended February 26, 2011.
Advertising expense for the eight-month period ended October 29, 2011 was $2.5 million as compared to $7.0 million for the twelve month period ended February 26, 2011. During the course of fiscal year 2011, the Company refocused the level and timing of its advertising expenditures and campaigns by decreasing spending on radio, print and outdoor signage. The use of social media and enhanced messaging to customers through email blasts and the Company websites enabled the Company to actively market in a targeted manner while reducing advertising expenses throughout the year.
Occupancy costs (net) for the eight months ended October 29, 2011 was $43.1 million compared to $64.2 million for the twelve months ended February 26, 2011. Included as a reduction of net occupancy cost is rental income from third parties on real estate holdings incidental to the Company’s retail operations. For the eight months ended October 29, 2011 and the twelve months ended February 26, 2011, the rental income was $1.4 million and $2.3 million, respectively.
Depreciation and amortization expense was $9.8 million and $14.6 million for the eight months ended October 29, 2011 and for the twelve months ended February 26, 2011, respectively.
| 16 |
| SYMS CORP. |
Gain on disposition of assets for the eight months ended October 29, 2011 was $7.6 million due primarily to the gain on the sale and leaseback of the Tampa, FL location, the sale of the store located in Rockville, MD, the proceeds of a partial condemnation of the property adjacent to the Marietta, GA store, offset by the loss from the sale of the North Randall, OH location.Loss on disposition of assets for fiscal 2010 was $0.5 million, which was the net result of closing four stores, selling three stores and downsizing one store.
The Company recorded no asset impairment charge during the eight months ended October 29, 2011. Asset impairment charges for fiscal 2010 were $4.3 million or 1.0% of net sales. During fiscal 2010, the Company determined that six stores’ long-lived assets had been impaired. In addition, the Company shifted most of its merchandise processing from its New Jersey distribution center to its Massachusetts distribution center, in order to reduce distribution costs. This shift resulted in a partial impairment of the New Jersey facility. In conjunction with this move, an office in Massachusetts was closed giving rise to a further impairment charge.
Other expenses for the eight months ended October 29, 2011 was $4.8 million, of which $1.5 million were estimated costs associated with the retro-fit of the Park Avenue, NY store, the settlement of the Fulton, NY store lease obligation of $1.1 million and the settlement of the Fifth Avenue, NY store lease obligation of $2.6 million.The Fifth Avenue, NY Store obligation of $2.6 million was subsequently reimbursed to the Company and was later adjusted as part of the liquidation leases adjustment.
The Company recorded no restructuring charges during the eight months ended October 29, 2011. During fiscal 2010, the Company recorded $9.3 million of restructuring charges. The Company opened one store and closed four stores during fiscal 2010. The Company was required to continue to make lease payments on two of these closed stores, one through May 2012 and the other through September 2017. The Company had recorded the present value of these payments as a restructuring charge, totaling approximately $7.2 million. In addition, as part of the integration of the Syms and Filene’s operations, a total of $2.1 million of information technology related professional fees, legal fees and severance costs associated with staffing level reductions, which were incurred and were recorded as restructuring charges in fiscal 2010.
Interest expense for the eight months ended October 29, 2011 and the twelve months ended February 26, 2011 was $1.1 million and $1.4 million, respectively. These expenses were the result of borrowings on the Company’s revolving credit facility during these periods.
As a result of the above-noted items, the loss before income taxes for the eight month period ended October 29, 2011 was $29.6 million compared with $51.7 million for the twelve-month period ended February 26, 2011.
For the eight-month period ended October 29, 2011 (pre-filing period), the Company wrote off its short-term and long-term deferred tax assets of approximately $46.3 million as a result of management making the determination that the recovery of the assets was not likely. The effective income tax rate for the eight-month period ended October 29, 2011 was (156.7%). For fiscal 2010, the effective income tax rate was 36.5%. In fiscal 2010, the difference between the effective income tax rate and the federal statutory rate resulted primarily from state income taxes, adjustments related to prior year income taxes, and to a lesser extent permanent differences in the deductibility of expenses for book and tax.
Fiscal Year Ended February 26, 2011 (Fiscal 2010) Compared to Fiscal Year Ended February 27, 2010 (Fiscal 2009) Compared to Fiscal Year Ended February 28, 2009 (Fiscal 2008)
Net sales forincreased by $67.8 million or 18% to $445.1 million during fiscal 20092010 from $377.3 million in fiscal 2009. This increase was primarily the result of having a full twelve months of sales in fiscal 2010 from the Filene’s stores which were $377,309,000, an increase of $135,309,000 (55.9%) as compared to net sales of $242,000,000 oracquired in fiscal 2008.2009. Net sales forin fiscal 2009 included sales from Filene’s from June 19, 2009 (first date(the Company’s first day of operating ownership)ownership of $177,483,000.Filene’s). Comparable store sales, which areincluding Filene’s sales for Syms stores only, decreased 14.9% or approximately $32.4 million, reflective of the continued economic recessioncomparable periods, were flat in fiscal 2010. Comparable store sales in the U.S. which resulted in lower retailprior year, excluding Filene’s sales, across most markets. In ourdecreased 15%. The Company’s comparable store sales computation we only includeincludes stores that have been openedowned and operated by the Company for a period of at least 12 monthstwelve full fiscal months. In addition, the Company opened one store during fiscal 2010 which contributed $1.9 million of the sales increase. Partially offsetting the above sales increases was the loss of $24.7 million of sales in fiscal 2010 resulting from the closing of four stores during fiscal 2010 and five stores that were open during both fiscal years. Syms closed a store in Virginia and opened a new store in close proximity2009.
By merchandise category, our Women’s business grew to the previous location. This location is included46% of total company net sales from 44% in the comparable store comparisons. We opened no new locationsprior year, Domestics grew to 6% from 5% last year and Shoes grew to 5% from 4% in fiscal 2009. This was primarily the result of having a full twelve months of sales in fiscal 2010 from the Filene’s stores which were acquired in fiscal 2009. These increases came at the expense of Men’s which decreased 4%, from 42% of total Company net sales in fiscal 2009 to 38% this year. Children’s apparel did not change, remaining at 5% of total company net sales.
Comparable store sales for the stores in the New York metropolitan area were negative low single digits. Offsetting this were the stores in the South that had flat comparable store sales and therestores in other areas of the country that had comparable store sales increase in the low single digits.
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| SYMS CORP. |
Gross profit increased by $28.7 million to $173.8 million during fiscal 2010 from $145.1 million during fiscal 2009. This increase was no expansion in square footage in existing stores. The remaining $9.8 million decline inprimarily the result of having a full 12 months of sales relates primarily to stores closed in fiscal 2010 from the Filene’s stores which were acquired in fiscal 2009.
Gross profit for fiscal 2009 was $145,102,000 or 38.5%as a percent of net sales compared with $100,525,000 or 41.5% of net sales forincreased 50 basis points to 39.0% during fiscal 2010 from 38.5% during the comparable prior year anperiod. This increase of $44,577,000 or 44.3%. Gross profit for fiscal 2009 included gross profit from Filene’s from June 19, 2009 (first date of operating ownership) of $69,012,000. Gross profit for Syms, exclusive of Filene’s, decreased by $24.4 million which is attributable to decreased sales from declines in store traffic commensurate with the recessionary trend in the U.S. economy and a reduction in gross profit percentage from 41.5% to 38.1%. This decline in gross profit percentage is attributable to reduced margin on close-out sales at five stores -- Hurst, TX, Towson, MD, Commack, NY, Providence, RI, and Peabody, MA -- that were closed in fiscal 2009, reduced margin on selected merchandise at two stores in preparation for co-branding of Syms and Filene’s merchandise in the same location (Fairfield, CT and Norwood, MA), and overall margin decline across all storeswas primarily due to the Company taking fewer markdowns this year as a re-pricing strategyresult of it being less promotional. Partially offsetting the lower markdowns, the Company increased its reserve for inventory obsolescence by $6.2 million, as it determined that it had not adequately cleared out old season merchandise as of year-end. In addition, the Company’s leased department income increased during fiscal 2010. Partially offsetting these increases was a lower markup, as the Company continued to reduce prices in order to 2001 retail levels. maintain competitiveness with other retailers.
The Company’s gross profit may not be comparable to thoseexcludes the cost of other entities, since some retail entities may include all costs related to theirits distribution network. For the fiscal years ended February 26, 2011 and February 27, 2010, the amounts incurred for our distribution network that were classified in cost of goods sold while others, like the Company, exclude a portion of those costs from gross profit and, instead, include them in operating expenses such as selling, general and administrative expenses and occupancy costs.costs were $19.0 million and $15.6 million, respectively.
Selling, general and administrative expense (“
SG&A”)&A increased $39,218,000$14.9 million to $113,908,000 (30.2% as a percentage of net sales) for$124.4 million during fiscal 20092010 as compared to $74,690,000 (30.9%$109.5 million during fiscal 2009. This increase was primarily the result of having a full 12 months of expenses in fiscal 2010 from the Filene’s stores, which were acquired in fiscal 2009. As a percent of net sales, SG&A decreased approximately 110 basis points to 27.9% of net sales during fiscal 2010 from 29.0% of net sales in the comparable prior year period. SG&A as a percentagepercent of net sales) for fiscal 2008. SG&A for fiscal 2009 included SG&A from Filene’s from June 19, 2009 (first date of operating ownership) of $46,042,000. SG&A for Syms, exclusive of Filene’s,sales decreased by $6,824,000, predominatelyprimarily as a result of reductionslower payroll expenses as a percent of net sales during fiscal 2010. In addition, the prior year period included life insurance premiums on the policy covering the Company’s founder prior to his death in personnel and other controllable expenses commensurate with the reduction in sales previously discussed.November 2009.
Advertising expense for fiscal 20092010 was $8,193,000$7.0 million or 1.6% of net sales as compared to $8.2 million or 2.2% of net sales compared with $6,339,000for fiscal 2009. Advertising expense for fiscal 2010 decreased primarily due to the Company being less promotional this year, a reallocation of advertising efforts to less expensive social media from more traditional media and the fact that the Company incurred expenses celebrating Filene’s 100th anniversary and Syms’ 50th anniversary in fiscal 2009.
Occupancy costs, net, were $64.2 million or 2.6%14.4% of net sales for the prior year, an increase of $1,854,000fiscal 2010 as compared to $49.5 million or 29.2%. Advertising expense for fiscal 2009 included advertising expense from Filene’s from June 19, 2009 (first date of operating ownership) of $3,127,000. For fiscal 2009 vs. fiscal 2008, advertising expense for Syms, exclusive of Filene’s, decreased by $1,273,000, primarily due to shifts away from TV advertising to a lower-cost and more geographically focused usage of radio, e-mail and in-store promotional activities.
Occupancy costs for fiscal 2009 were $45,087,000 or 12.0% of net sales compared with $15,557,000 or 6.4%13.1% of net sales for fiscal 2009. This increase was primarily the prior year, anresult of having a full 12 months of occupancy costs in fiscal 2010 from the Filene’s stores which were acquired in fiscal 2009. Partially offsetting this increase was the closing of $29,530,000. Occupancyfour stores during fiscal 2010 and five stores during fiscal 2009. The Company reduces its net occupancy costs forby the amount of rental income from third parties on real estate holdings incidental to the Company’s retail operations. That factor did not materially impact comparative results during fiscal 2010. For fiscal 2010 and fiscal 2009, included occupancy costs from Filene’s from June 19, 2009 (first date of operating ownership) of $30,844,000. Occupancy costs for Syms, exclusive of Filene’s, decreased by $1,314,000, primarily as a result of the closure of five store locations. In addition, increased occupancy in
certain rental properties resulted in the Company offsetting occupancy costs with net rental income of $2,372,000 in fiscal 2009 compared to $2,026,000 in fiscal 2008.was $2.3 million and $2.4 million, respectively.
Depreciation and amortization expense for fiscal 2009 was $11,414,000 or 3.0% of net sales compared with $8,003,000$14.6 million or 3.3% of net sales for the prior year, an increasefiscal 2010 as compared to $11.4 million or 3.0% of $3,250,000. Depreciation and amortization expensenet sales for fiscal 2009 included2009. The increase in depreciation and amortization expense was primarily a result of the acquisition of Filene’s, Inc. assets and capital expenditure additions during the past two fiscal years.
Asset impairment charge for fiscal 2010 was $4.3 million or 1.0% of net sales as compared to $0.1 million or 0.0% of net sales for fiscal 2009. During fiscal 2010, the Company determined that six stores’ long-lived assets had been impaired. In addition, the Company shifted most of its merchandise processing from Filene’s from June 19, 2009 (first dateits New Jersey distribution center to its Massachusetts distribution center, in order to reduce distribution costs. This shift resulted in a partial impairment of operating ownership) of $3,767,000. Forthe New Jersey facility. In conjunction with this move, an office in Massachusetts was closed giving rise to a further impairment charge. During fiscal 2009, depreciation and amortization expense for Syms, exclusive of Filene’s, decreased by $356,000 due primarilyone store’s long-lived assets had been determined to assets reaching fully depreciated status.be impaired.
In conjunction with the acquisition of assets from Filene’s, Inc. in June 2009, the Company determined that the fair values of assets acquired exceeded the purchase price by approximately $9.7 million, resulting in a bargain purchase gain in fiscal 2009, based upon valuations of inventory, fixed assets, equipment and intangible assets net of deferred taxes, customer obligations and other adjustments. Acquisition costs inclusive of $4.9 million, including investment banking, legal, professional and other costs, aggregating $4.9 million were expensed in the periods incurred.fiscal 2009.
During Fiscal 2009 the Company recorded an impairment charge of $80,000 related to estimated impairments in carrying value of one retail location and a loss of $1,168,000 from the disposition of assets related to the closure of five store locations. During Fiscal 2008 the Company recorded an impairment charge of $530,000 and a gain from the sale of assets of $503,000.
Other income was $25,049,000$0 for fiscal 20092010 as compared to $53,000$25.0 million for fiscal 2008. This increase is due to the receipt of life insurance proceeds from officers’ life insurance policies on the life of the Company’s founder (Sy Syms), who died on November 17, 2009.
Interest expense was $1,538,000 for fiscal 2009 as compared to $38,000 for fiscal 2008. This increase is due to interest incurred on a cash surrender value advance and interest incurred on borrowings under a revolving credit facility with Bank of America and an unused credit line with IDB.
Net loss before the recovery of Last year’s income taxes for fiscal 2009 was $6,380,000 or (1.7%) of net sales compared with net loss before income taxes of $4,031,000 or (1.7%) of net sales for fiscal 2008, a decrease of $2,349,000. The decrease in operating results before income taxes resulted from the factors discussed above.
For Fiscal 2009 the effective income tax rate was 230.2% as compared to 15.1% for Fiscal 2008. The increase in the effective tax rate for Fiscal 2009 reflects the impact of permanent differences of certain income items not taxable.
Fiscal Year Ended February 28, 2009 (Fiscal 2008) Compared to Fiscal Year Ended March 1, 2008 (Fiscal 2007)
Net sales for Fiscal 2008 were $242,000,000, a decrease of $25,149,000 (9.4%) as compared to net sales of $267,149,000 for Fiscal 2007. The decrease in sales is largely attributable to reductions in store traffic, especially in the latter half of Fiscal 2008, as general economic conditions resulted in lower retail sales across most markets. Comparable store sales in Fiscal 2008 decreased 7.9% or approximately $20.5 million. In our comparable store computation, we only include locations that were open for a period of at least twelve months and stores that were open during both fiscal years. We opened no new locations in Fiscal 2008 and there was no expansion in square footage in existing stores.
Gross profit for Fiscal 2008 was $100,525,000 or 41.5% of net sales compared with $109,981,000 or 41.2% of net sales for the prior year, a decrease of $9,456,000 or 8.6%. The gross profit percentage increased 0.3% in Fiscal 2008 primarily reflective of improved physical controls over inventory coupled with reductions in mark-downs reflective of changes in inventory mix. The Company’s gross profit may not be comparable to those of other entities that include all of the costs related to their distribution network in cost of goods sold because the Company excludes a portion of those costs from gross profit. Instead, the Company includes such costs in other items such as SG&A costs and/or occupancy costs.
SG&A expense for Fiscal 2008 was $74,690,000 or 30.9% of net sales compared with $76,959,000 or 28.8% of net sales for the prior year, a decrease of $2,269,000 or 2.9%. SG&A expenses decreased primarily as a result of costs cut in the face of declining sales, with the greatest reductions in costs realized in payroll related expenses offset by increases in health insurance, union and certain other insurance costs.
Advertising expense for Fiscal 2008 was $6,339,000 or 2.6% of net sales compared with $8,561,000 or 3.2% of net sales for the prior year, a decrease of $2,222,000 or 25.9% due primarily to general reductions in advertising across all lines of media coupled with higher concentration in electronic and direct to consumer promotions which tend to be lower cost.
Occupancy costs for Fiscal 2008 were $15,557,000 or 6.4% of net sales compared with $14,323,000 or 5.4% of net sales for the prior year, an increase of $1,234,000 or 8.6%. The increase in occupancy costs is largely attributable to higher common area charges at leased locations and higher utility costs. In addition, increased vacancy from tenancy in owned buildings resulted in the Company offsetting occupancy costs with net rental income of $2,026,000 in fiscal 2008 compared to $3,006,000 in fiscal 2007.
Depreciation and amortization expense for Fiscal 2008 was $8,003,000 or 3.3% of net sales compared with $7,659,000 or 2.9% of net sales for the prior year. Depreciation and amortization expense increased $344,000 or 4.5% largely as a result of capital improvements, such as roofing and HVAC upgrades at various retail locations, as well as in Syms our distribution center.
During Fiscal 2008 the Company recorded an impairment charge of $530,000 related to estimated impairments in carrying values of two retail locations and a gain of $548,000 from the sale of a small parcel of realty. During Fiscal 2007 the Company recorded an impairment charge of $745,000 relating to the closure of a store in Cleveland, Ohio in July 2007. No sales of Company properties occurred in Fiscal 2007.
Net loss before the recovery of income taxes for Fiscal 2008 was $4,031,000 or (1.7%) of net sales compared with net income before income taxes of $3,136,000 or 1.2% of net sales for the prior year, a decrease of $7,167,000. The decline in operating results before income taxes resulted from the factors discussed above.
For Fiscal 2008 the effective income tax rate was 15.1% as compared to 74.3% for Fiscal 2007. The decrease in the effective tax rate for Fiscal 2008 reflects the impact of permanent differences of certain expense items not deductible for tax purposes.
Liquidity and Capital Resources
Working capital at February 27, 2010 was $52,798,000, an increase of $9,583,000 from February 28, 2009, and the ratio of current assets to current liabilities was 1.84 to 1 as compared to 2.53 to 1 at February 28, 2009. The Company’s merchandise inventory was $29,754,000 higher at fiscal year-end primarily due to the acquisition of Filene’s partially offset by the Company’s efforts to reduce inventory in the face of reduced store traffic in the current economic environment. Accounts payable increased $32,420,000 from February 28, 2009 primarily due to the acquisition of Filene’s. Assets Held For Sale increased $7,190,000 from February 28, 2009 as a result of the closing of the Hurst, TX and Commack, NY stores in fiscal 2009 and actively pursuing the sale of these properties.
Net cash provided by operating activities totaled $26,877,000 for Fiscal 2009 as compared to $3,215,000 for Fiscal 2008. This increase is primarily due to receipt ofon life insurance proceeds from officers’ life insurance policies on the Company’s founder, who diedpassed away during fiscal 2009.
Loss on disposition of assets for fiscal 2010 was $0.5 million or 0.1% of net sales as compared to $1.2 million or 0.3% of net sales for fiscal 2009. During fiscal 2010 the loss on disposition of assets was the net result of closing four stores, selling three stores and downsizing one store. The related charge in fiscal 2009 was related to the closure of five stores.
| 18 |
| SYMS CORP. |
The Company recorded $9.3 million of restructuring charges during fiscal 2010 and had no such charges in fiscal 2009. The Company opened one store and closed four stores during fiscal 2010. The Company is required to continue to make lease payments on two of these closed stores, one through May 2012 and the other through September 2017. The Company has recorded the present value of these payments as a restructuring charge, totaling approximately $7.2 million. In addition, as part of the integration of the Syms and Filene’s operations, a total of $2.1 million of IT related professional fees, legal fees and severance costs associated with staffing level reductions were incurred and have been recorded as restructuring charges.
Interest expense was $1.4 million or 0.3% of net sales during fiscal 2010 compared to $1.5 million or 0.4% of net sales during fiscal 2009. For fiscal 2010, interest expense was a result of borrowings on the Company’s revolving credit facility. During the prior year period, interest expense was due to borrowings against the cash surrender value of officers’ life insurance policies and borrowings on the Company’s revolving credit facility.
The sales and gross profit increase attributable to the acquisition of assets from Filene’s, Inc. were insufficient to offset the expense increases and impairment and restructuring charges incurred during fiscal 2010. As a result of the above-noted items, the loss before income taxes for fiscal 2010 was $51.7 million as compared to a loss of $6.4 million for fiscal 2009.
For fiscal 2010, the effective income tax rate was 36.5% as compared to 230.2% for fiscal 2009. In fiscal 2010, the difference between the effective income tax rate and the federal statutory rate resulted primarily from state income taxes, adjustments related to prior year income taxes, and to a lesser extent permanent differences in the deductibility of expenses for book and tax. In fiscal 2009, this difference related mostly to the non-taxable nature of the life insurance proceeds received and recorded in income, partially offset by the effect of adjustments related to prior year taxes.
Liquidity and Capital Resources
Until October 29, 2011, the Company purchased first-quality, in-season designer and brand name merchandise from more than 900 vendors at prices we believed to be below those generally available to major department and specialty stores. We are no longer making merchandise purchases from these vendors as a result of our Chapter 11 filing. However, until we ceased merchandise purchases, we were highly reliant on the trade credit from factors, vendors and service providers. Decreasing availability of trade credit throughout the eight months ending October 29, 2011 limited our available liquidity.
Net cash used in operating activities totaled $10.0 million for the eight months ended October 29, 2011 as compared with $15.6 million for the twelve months ended February 26, 2011. The net cash used in operating activities for the eight months ended October 29, 2011 reflects the net loss and a change in working capital due to lower operating expenses partially offset by the impact of reduced inventory.
Net cash provided by investing activities was $51,097,000$20.9 million for fiscal 2009the eight months ended October 29, 2011 was comprised of proceeds from the sale of land, buildings and other assets for four store locations for $22.0 million, partially offset by capital expenditures for property and equipment of $1.2 million. Net cash used of $4.8 million for the twelve months ended February 26, 2011 was comprised of capital expenditures for property and equipment for $15.5 million partially offset by the proceeds from the sale of land, building and other assets of three locations for $10.8 million.
Net cash used in financing activities was $10.9 million for the eight months ended October 29, 2011, as compared to net cash used of $12,778,000 for fiscal 2008. The acquisition of the assets of Filene’s largely accounts for this increase.
Net cash provided by financing activities of $20.6 million for the twelve months ended February 26, 2011. The cash used this year was $24,447,000 for fiscal 2009the result of net repayments on our credit facility as compared to net cash used of $519,000borrowings last year which were needed to provide for fiscal 2008. For fiscal 2009, this reflects an advance of $16,000,000 of cash value of officers’ life insurance and proceeds from credit borrowings of $8,402,000 to cover operating expenses. For fiscal 2008, this reflects the purchase of treasury shares of $2,817,000 offset in substantial part by proceeds from options exercises of $2,298,000.
The Company had an unsecured $40 million, revolving credit facility with Israel Discount Bank (“IDB”) through June 4, 2009, the agreement for which contained various financial covenants and ratio requirements. There were no borrowings under this facility during its term and the Company was in compliance with its covenants during the period in which this facility was available. Effective June 5, 2009 the Company revised this facility to a secured $40 million, revolving credit facility with the same bank and in connection with the acquisition of Filene’s, borrowed $24.0 million under this facility.
On August 27, 2009, the Company entered into a secured $75 million secured, revolving credit facilityagreement, which was set to expire on August 27, 2012. That credit agreement, which was amended as of January 7, 2011, March 8, 2011 and June 16, 2011, was among Syms, as Lead Borrower, Filene’s Basement, LLC (together with the Lead Borrower, collectively the “Borrowers”), the guarantors named therein, the lenders party thereto and Bank of America, N.A., as Administrative Agent and Collateral Agent (the “Credit Agreement”).
The Credit Agreement was paid off and terminated on November 18, 2011. Availability under the Credit Agreement was based on a borrowing base consisting generally of certain inventory, credit card receivables, mortgaged real estate and cash collateral (the “Borrowing Base”). In connection with the Credit Agreement, the Company recognized approximately $1.1 million of deferred financing costs, which replacedwere being amortized over the IDB facility. term of the agreement.
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| SYMS CORP. |
The CompanyCredit Agreement bore interest at various rates depending on availability under a formula set forth in the Credit Agreement. As of November 18, 2011, the date in which the Credit Agreement was paid off, the interest rate was Prime +2.50% or LIBOR +3.50%. In addition, the Borrowers were subject to certain negative covenants customary for credit facilities of this size, type and purpose. These covenants restricted or limited, among other things, their ability to incur additional indebtedness, grant liens on their assets, dispose of assets, make acquisitions and investments, merge, dissolve or consolidate and pay dividends, redeem equity and make other restricted payments.
The Credit Agreement contained a financial covenant which required that the Borrowers maintain at all times unutilized borrowing capacity under the Credit Agreement in an amount of not less than 10% of the Borrowing Base described above (or $7.5 million, whichever is in compliance in all respects with this facility at February 27, 2010. less).
As of February 27, 2010, $8 million is25, 2012, Syms had no outstanding debt under this facility. Each of the Company’s loan
facilities havefacility, had repaid all its obligations and terminated its Credit Agreement with Bank Of America. The Credit Agreement had sub-limits for letters of credit (“LC”), which, when utilized, reducereduced availability under the facility.Credit Agreement. At February 27, 2010 and February 28, 200925, 2012 the Company had outstanding letters of credit of $6,552,000$1.3 million, of which $1.1 million is for a standby LC for workers compensation and $741,000 respectively.
Thegeneral liability insurance and $0.2 million is a standby LC for merchandise. At February 26, 2011, the Company had budgeted capital expendituresoutstanding letters of approximately $8 millioncredit under the facility of $10.1 million.
Total interest charges incurred for the eight months ended October 29, 2011, and fiscal year ending February 27, 2010. For the year, the Company incurred $12years 2010 and 2009 were approximately $1.1 million, of capital expenditures. Capital expenditures exceeded budget due primarily to unforeseen expenditures for a new roof at the Secaucus, NJ facility of $1.5 million, additional IT costs related to the Epicor conversion of $1.5 million and expenditures to refurbish Co-branded stores$1.6 million, respectively. There was no capitalized interest for fiscal 2011, 2010 and Filene’s stores which were not known at the time the budget was prepared. Capital expenditures are expected to range from $15 million to $17 million for Fiscal 2010. Although some of the anticipated expenditures are discretionary, we believe that they are necessary to maintain efficient, orderly and safe operating environments. We expect to fund these expenditures from cash generated by operations and the Company’s existing credit facilities.2009.
The Company’s acquisition of Filene’s was effected pursuant to an order of the United States Bankruptcy Court for the District of Delaware entered under Sections 105, 363 and 365 of the United States Bankruptcy Code and a purchase agreement (the “Purchase Agreement”) entered into by a wholly-owned subsidiary of the Company and other parties. Pursuant to the Purchase Agreement, the Company acquired real property leases relating to 23 Filene’s store locations and a distribution center, fixed assets and equipment at such locations, inventory at all Filene’s locations (regardless of whether the Company assumed the real property lease for the subject location), certain of Filene’s contracts, certain intellectual property and certain other related assets. The Company also assumed certain obligations under such contracts and the real property leases relating to the acquired locations. The purchase price (the “Purchase Price”) paid at closing for the assets acquired by the Company, Vornado Realty Trust and its fifty percent owned joint venture (unrelated to the Company) was $64,392,120, of which the Company paid $38,926,800 and, as more fully described below, Vornado and its joint venture paid $25,050,000. The Company funded its portion of the Purchase Price, as well as other amounts it paid at closing, with borrowings under the Company’s secured credit facility with Israel Discount Bank, and from a withdrawal of $16.0 million of accumulated cash value from a life insurance policy. Vornado’s $25,050,000 payment was comprised of the following: (i) a joint venture (unrelated to the Company) fifty percent owned by Vornado paying approximately $16,800,000 of the Purchase Price to acquire from the seller a termination of the venture’s existing lease in Boston, Massachusetts with the seller; and (ii) Vornado’s funding $8,250,000 in connection with the Company’s agreeing to amend Vornado’s lease assumed by the Company at 4 Union Square South in New York, New York, to provide, among other things, for a minimum $1,500,000 increase in annual rent. The lease between Vornado and Filene’s at Vornado’s Bergen Town Center in Paramus, New Jersey was also assumed by the Company.
The U.S. economy is continuing to experience weakness across virtually every sector. Such continued weakness could negatively affect the Company’s cash, sales and/or operating performance and, further, could limit additional capital if needed and increase concomitant costs. Management believes that existing cash, internally generated funds, trade credit and funds available from the revolving credit facility will be sufficient for working capital and capital expenditure requirements for the fiscal year ending February 28, 2011.
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 for its last three fiscal years.
Contractual Obligations and Commercial Commitments
To facilitate an understanding of our contractual obligations and commercial commitments, the following data is provided:
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| Payments Due by Period |
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| Total |
| Less than |
| 2-3 years |
| 4-5 years |
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Contractual Obligations |
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Operating Leases |
| $ | 318,061,000 |
| $ | 35,526,000 |
| $ | 65,285,000 |
| $ | 60,832,000 |
| $ | 156,418,000 |
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Revolving Credit Facility |
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| 8,402,000 |
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| 8,402,000 |
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Total Contractual Cash Obligations |
| $ | 326,463,000 |
| $ | 35,526,000 |
| $ | 73,687,000 |
| $ | 60,832,000 |
| $ | 156,418,000 |
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| Amount of Commitment Expiration Per Period |
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| Within |
| 2-3 years |
| 4-5 years |
| After 5 |
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Other Commercial Commitments |
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Lines of Credit |
| $ | — |
| $ | — |
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| — |
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| — |
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| — |
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Letters of Credit |
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| 6,552,000 |
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| 6,552,000 |
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| — |
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| — |
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| — |
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Total Commercial Commitments |
| $ | 6,552,000 |
| $ | 6,552,000 |
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| — |
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We took into account the material nature of operating agreements and lines of credit for merchandise in determining whether to include these items in contractual obligations and commercial commitments.
Off - Balance Sheet Arrangements
The Company has no off-balance sheet arrangements (as defined in Item 303 of Regulation S-K).
Recent Accounting Pronouncements
See Note 1 of2 to the Consolidated Financial Statements for a full description of the Recent Accounting Pronouncements, including the respective dates of adoption and the effects on our results of operations and financial condition.
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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’s operations areCompany is not currently subject to material market risks for interest rates, foreign currency rates or other market price risks.risks, however, may experience real estate valuation risk due to changing market conditions.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated herein by reference to the financial statements and supplementarysupplemental data set forth in “Item 15 – Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
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None.
Item 9A. CONTROLS AND PROCEDURES
| (a) | Evaluation of Disclosure Controls and Procedures |
The Company maintains disclosure controls and procedures that are designed to ensure (i) that information required to be disclosed in its reports filed or submitted pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and (ii) that information required to be disclosed by the Company in its Exchange Act reports is accumulated and communicated to management including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
| 20 |
| SYMS CORP. |
Under the supervision and with the participation of our management, including Marcy Syms, the Chief Executive Officer of the Company and Raymond Siconolfi, the Controller and Chief AccountingFinancial Officer of the Company, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as required by Rule 13a-15(b) of the Securities Exchange Act, of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report.
Based onupon that evaluation, the Company’s Chief Executive Officer and the Chief AccountingFinancial Officer have concluded that thesethe Company’s disclosure controls and procedures arewere effective at a reasonable assurance level.as of such date as described below in “Management’s Report on Internal Control Over Financial Reporting.” Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose information otherwise required to be set forth in the Company’s periodic reports.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
| (b) | Management’s Report on Internal Control Over Financial Reporting |
May 13, 2010
To the Shareholders of Syms Corp.
The management of Syms Corp.the Company is responsible for the preparation, integrity, objectivity and fair presentation of the financial statements and other financial information presented in this report. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and reflect the effects of certain judgments and estimates made by management.
In order to ensure that our internal control over financial reporting is effective, management regularly assesses such controls and did so most recently for our financial reporting as of February 27, 2010.25, 2012. This assessment was based on criteria for effective internal control over financial reporting described in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission referred to as COSO.(“COSO”). Our assessment included the documentation and understanding of our internal control over financial reporting. We have evaluated the design effectiveness and tested the operating effectiveness of internal controls to form our conclusion.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that pertain to maintaining records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets, providing reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, assuring that receipts and expenditures are being made in accordance with authorizations of our management and directors and providing reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Based on this assessment, the undersigned officersmanagement of the Company has concluded (i) that our internal controls and procedures are effective in timely alerting themit to material information required to be included in our periodic SEC filings and (ii) that information required to be disclosed by us in these periodic filings is recorded, processed, summarized and reported within the time periods specified in the SEC’sSEC's rules and forms and that our internal controls are effective to provide reasonable assurance that our financial statements are fairly presented in conformity with generally accepted accounting principles. The Company has excluded Filene’s Basement from its Report on Internal Control over Financial Reporting for fiscal 2009 due to the timing of closing date of the acquisition on June 18, 2009 and the expectation that internal control over financial reporting related to Filene’s Basement will be changed to conform with our internal control over financial reporting in 2010. Activity related to Filene’s Basement will be included in management’s 2010 internal control assessment. Filene’s Basement constituted approximately 13% of consolidated assets as of February 27, 2010. Filene’s Basement net sales and net loss constituted 47% and 26% of net sales and net income (before inclusion of Filene’s net loss), respectively, for the year then ended.
There have been no significant changes in the Company’s internal controls or in other factors which could materially affect internal controls subsequent to the date the Company’s management carried out its evaluation.
The Audit Committee of ourthe Board, of Directors, which consists of independent, non-executive directors, meets regularly with management, the internal auditors and the independent registered public accountants to review accounting, reporting, auditing and internal control matters. The Committee has direct and private access to both internal and external auditors.
BDO Seidman,USA, LLP, the independent registered public accounting firm which audits our financial statements, has audited internal control over financial reporting as of February 27, 201025, 2012 and has expressed an unqualified opinion thereon.issued the below attestation report on management’s assessment of the Company’s internal control over financial reporting.
| 21 |
| SYMS CORP. |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Syms Corp
Corp.
Secaucus, NJ
We have audited the Syms Corp’s internal control over financial reporting as of February 27, 2010,25, 2012, based on criteria established inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Syms Corp’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, “Management’s Report on Internal Control Over Financial Reporting”. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As indicated in the accompanying Item 9A, “Management’s Report on Internal Control over Financial Reporting”, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Filenes Basement, which was acquired on June 18, 2009, and the accounts of which are included in the consolidated balance sheet of Syms Corp as of February 27, 2010, and the related consolidated statements of operations, shareholder’s equity, and cash flows for the year then ended. Filenes Basement assets and net liabilities constituted 13% and 2% of total assets and net assets, respectively, as of February 27, 2010. Filene’s Basement net sales and net loss constituted 47% and 26% of net sales and net income (before inclusion of Filene’s net loss), respectively, for the year then ended. Management did not assess the effectiveness of internal control over financial reporting of Filenes Basement because of the timing of the acquisition which was completed on June 18, 2009. Our audit of internal control over financial reporting of Syms Corp also did not include an evaluation of the internal control over financial reporting of Filenes Basement.
In our opinion, Syms CorpCorp. maintained, in all material respects, effective internal control over financial reporting as of February 27, 2010,25, 2012, based on the COSO criteria.criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated balance sheetsstatement of Syms Corpnet assets as of February 25, 2012, and the related consolidated statement of changes in net assets for the period October 30, 2011 to February 25, 2012.
We have audited the accompanying consolidated statements of operations, shareholders’ equity and cash flows for the period February 27, 2010,2011 to October 29, 2011. We have also audited the accompanying consolidated balance sheet of the Company as of February 26, 2011, and the related consolidated statements of operations, shareholder’sshareholders’ equity, and cash flows for each of the year thentwo fiscal years ended February 26, 2011 and our report dated May 13, 201025, 2012 expressed an unqualified opinion thereon.
/s/ BDO Seidman,USA, LLP
BDO USA, LLP
New York, New York
May 13, 201025, 2012
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| SYMS CORP. |
(d) Changes in Internal Controls Over Financial Reporting
As a result of the Company’s decision to file Chapter 11 Bankruptcy and liquidate the retail operations, certain operating processes and the related financial reporting controls have changed in nature or have been discontinued. As noted above, the Company’s management believe that the financial reporting controls in place as of February 25, 2012 are effective.
Item 9B. OTHER INFORMATION
None.
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Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Company maintains a code of ethics applicable to the Company’s chief executive officer and senior financial and professional personnel (including the Company’s chief financial officer, principal accounting officer or controller and persons performing similar functions). The Company has posted a copy of such code of ethics on its website.website atwww.syms.com under “Investor Information” – “Corporate Governance”. The internet address forCompany will also make copies of such code of ethics is http://www.syms.com/pressreleases/corp_gov.asp.available to investors upon request. Any such request should be sent by mail to Syms Corp, One Syms Way, Secaucus, NJ 07094 Attn: Corporate Secretary or should be made by telephone by calling 201-902-9600.
In accordance with General Instruction G (3)G(3) of the General Instructions to Form 10-K, the other information called for by Item 10 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 the end of the fiscal year covered by this Annual Report.
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Item 11. EXECUTIVE COMPENSATION
In accordance with General Instruction G (3)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 the end of the fiscal year covered by this report.Annual Report.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Equity Plan Compensation Information
The following table provides information as of February 25, 2012, about the shares of our common stock that may be issued upon exercise of options granted to employees or members of our Board under all of our existing equity compensation plans, including our 2005 stock option plan.
|
| SYMS CORP. |
| COLUMN (A) | COLUMN (B) | COLUMN (C) | ||||||||||
| Number of securities to be issued upon exercise of outstanding Options | Weighted average exercise price of outstanding options | Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in Column (A)) | ||||||||||
| Plan Category: | ||||||||||||
| Equity compensation plans approved by security holders | 97,500 | $ | 15.01 | - | ||||||||
| Equity compensation plans not approved by security holders | - | - | - | |||||||||
| Total | 97,500 | $ | 15.01 | - | ||||||||
In accordance with General Instruction G(3) of the General Instructions to Form 10-K, the other 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 the end of the fiscal year covered by this Annual Report.
Equity Plan Compensation Information
Item 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The following table provides information as of February 27, 2010, about the shares of our common stock that may be issued upon exercise of options granted to employees or members of our Board under all of our existing equity compensation plans, including our 2005 stock option plan.
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| COLUMN (A) |
| COLUMN (B) |
| COLUMN (C) |
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| Securities to be issued upon |
| Weighted average exercise |
| Securities remaining available |
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Plan Category: |
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Equity compensation plans approved by security holders |
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| 97,500 |
| $ | 15.01 |
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| — |
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Equity compensation plans not approved by security holders |
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Total |
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| 97,500 |
| $ | 15.01 |
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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 the end of the fiscal year covered by this Annual Report.
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Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
In accordance with General Instruction G(3) of the General Instructions to Form 10-K, the information called for by Item 14 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 the end of the fiscal year covered by this Annual Report.
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| PAGE NUMBER | ||
| (a)(1) |
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| Financial Statements filed as part of this Annual Report: | |
F-1 | ||
| Consolidated Statement of Changes in Net Assets (Liquidation Basis) for the Period October 30, 2011 to February 25, 2012 | F-2 | |
| F-3 | ||
| Consolidated Statements of Operations for the Eight-Month Period Ended October 29, 2011 and the Fiscal Years Ended February 26, 2011 and February 27, 2010 (Going Concern Basis) |
| |
| for the Eight-Month Period Ended October 29, 2011 and the Fiscal Years Ended February 26, 2011 and February 27, 2010 (Going Concern Basis) |
| |
| for the Eight-Month Period Ended October 29, 2011 and the Fiscal Years Ended February 26, 2011 and February 27, 2010 (Going Concern Basis) |
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(a)(2) | List of Financial Statement Schedules filed as part of this Annual Report: |
| 24 |
| SYMS CORP. |
Report of Independent Registered Public Accounting Firm on Schedule II.
Schedule II: Valuation and qualifying accounts.
Schedules, other than the one listed above, are omitted because they are not applicable, or not required, or because the required information is included in the financial statements or notes thereto.
| (a)(3) | ||
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| List of Exhibits: | |
The following exhibits whichthat are marked with an asterisk are filed as part of this Annual Report, the following exhibits that are marked with a double asterisk are submitted with this Annual Report and the other exhibits set forth below are incorporated by reference 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 (the “Registration Statement”) 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).
2.1 | Purchase Agreement, dated as of June 18, 2009, by and among SYL, LLC, a wholly owned subsidiary of Syms Corp, |
| 2.2+ | Purchase and Sale Agreement, dated as of February 28, 2011, with Hines Interests Limited Partnership, a Delaware limited partnership, as Purchaser, for the sale of property located at 1900 Chapman Avenue, Rockville, Maryland(exhibit 2.2 to Amendment No. 1 to the Annual Report on Form 10-K/A dated December 27, 2011). |
| 3.1 | Certificate of Incorporation of Syms |
3.2 | Amended and Restated By-laws of Syms |
4.1 | Specimen Certificate of Common Stock as filed in the Registration Statement. |
10.1 | 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 Current Report on Form 8-K dated May 1986) . |
| Syms |
| Form of Nonqualified Stock Option Award Agreement for 2005 Stock Option Plan (exhibit 10.1 to Current Report on Form 8-K dated August 5, 2005) . |
| Form of Incentive Option Award for 2005 Stock Option Plan (exhibit 10.2 to Current Report on Form 8-K dated August 5, 2005) . |
| Form of Restricted Stock Award for 2005 Stock Option Plan (exhibit 10.3 to Current Report on Form 8-K dated August 5, 2005) . |
| Credit Agreement, dated as of August 27, 2009, by and among Syms |
| 10.6 | First Amendment to the Credit Agreement, dated as of January 7, 2011 (exhibit 10.1 to Current Report on Form 8-K dated | |
| 10.7 | Second Amendment to the Credit Agreement, dated as of March 8, 2011 (exhibit 10.7 to Annual Report on From 10-K for the year ended February 26, 2011). |
| 10.8 | Third Amendment to the Credit Agreement, dated as of June 16, 2011 (exhibit 10.1 to Current Report on Form 8-K dated June 17, 2011). |
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| SYMS CORP. |
| 10.9† | Employment offer letter dated September 8, 2010 between Syms Corp. and Laura Brandt (exhibit 10.1 to Quarterly Report on Form 10-Q dated July 7, 2011). |
| 10.10† | Employment offer letter dated September 14, 2010 between Syms Corp. and Carl Palumbo (exhibit 10.2 to Quarterly Report on Form 10-Q dated July 7, 2011). |
| 21.1 | List of Subsidiaries (exhibit 21.1 to Annual Report on Form 10-K dated May 13, 2011). | |
23.1* | Consent of BDO |
31.1* | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of |
31.2* | Certification of Chief |
32.1* | Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities and Exchange Act of 1934 and 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of |
32.2* | Certification of Chief |
| 101.INS** | XBRL Instance Document |
| 101.SCH** | XBRL Taxonomy Extension Schema Document |
| 101.CAL** | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB** | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE** | XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed herewith.
+ Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission in accordance with an order granting confidential treatment pursuant to the Securities Exchange Act of 1934, as amended.
† Management contract, compensatory plan or arrangement.
** Pursuant to Rule 406T of Regulation S-T this data is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.
| 26 |
| SYMS CORP. |
SIGNATURES
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: | |||
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| /s/ Marcy Syms | ||
Marcy Syms | |||
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Chairman and Chief Executive Officer | |||
Date: May 13, 201025, 2012
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 | ||||||||
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/s/ Marcy Syms | Chairman of the Board/ Chief Executive Officer | May | ||||||||
Marcy Syms | and Director (Principal executive officer) | |||||||||
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| /s/ Gary Binkoski | Chief Financial Officer | May 25, 2012 | ||||||||
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/s/ Bernard H. Tenenbaum | Director | May | ||||||||
Bernard H. Tenenbaum | ||||||||||
/s/ Thomas E. Zanecchia | Director | May | ||||||||
Thomas E. Zanecchia | ||||||||||
/s/ Henry M. Chidgey | Director | May | ||||||||
Henry M. Chidgey | ||||||||||
| 27 |
| SYMS CORP. |
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Syms Corp
Corp.
Secaucus, New Jersey
The audits referred to in our report dated May 13, 201025, 2012 relating to the financial statements of Syms Corp, which is contained in Item 15 of this Form 10-K also included the audit of the financial statement schedule listed in the accompanying index. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.
In our opinion such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/ BDO Seidman,
| /s/ BDO USA, LLP | |
| BDO USA, LLP | |
| New York, New York | |
| May 25, 2012 |
| 28 |
| SYMS CORP. |
BDO Seidman, LLPNew York, New YorkMay 13,
SCHEDULE II
SYMS CORP
Valuation and qualifying accounts
Fiscal years ended February 25, 2012, February 26, 2011 and February 27, 2010
SCHEDULE II
| Additions | ||||||||||||||||||||
| Balance at beginning of period | Charged against revenues or to costs & expenses | Charged to other accounts | Deductions | Balance at end of period | ||||||||||||||||
| Reserve for inventory obsolescence (1): | ||||||||||||||||||||
| Fiscal 2009 | 2,196,000 | 2,304,313 | - | (99,000 | ) | 4,401,313 | ||||||||||||||
| Fiscal 2010 | 4,401,313 | 7,428,200 | - | (1,222,080 | ) | 10,607,433 | ||||||||||||||
| Fiscal 2011 (2) | 10,607,433 | 1,780,388 | - | (12,387,821 | ) | - | ||||||||||||||
| Deferred tax valuating allowance: | ||||||||||||||||||||
| Fiscal 2009 | - | - | 346,000 | - | 346,000 | |||||||||||||||
| Fiscal 2010 | 346,000 | - | 1,154,000 | 1,500,000 | ||||||||||||||||
| Fiscal 2011(3) | 1,500,000 | - | 83,617,000 | - | 85,117,000 | |||||||||||||||
| (1) | Reflects adjustments of obsolete or out-of-season merchandise inventories to realizable value. Additions represent increases to the reserve and deductions represent decreases to the reserve based on quarterly assessments of the reserve. |
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Deductions for fiscal 2011 reflects the full liquidation of the inventory. |
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Fiscal 2007 |
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| 4,201,000 |
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| (1,381,000 | ) |
| 2,820,000 |
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Fiscal 2008 |
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| 2,820,000 |
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| (624,000 | ) |
| 2,196,000 |
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Fiscal 2009 |
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| 2,603,313 |
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| (398,000 | ) |
| 4,401,313 |
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Fiscal 2009 |
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| 346,000 |
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| (3) | The change for fiscal 2011 reflects a full valuation allowance against the Company's deferred tax assets. |
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| 30 |
| SYMS CORP. |
Report of Independent Registered Public Accounting Firm
Board of Directors and ShareholdersSYMS Corp
Syms Corp.
Secaucus, New Jersey
We have audited the accompanying consolidated balance sheetsstatement of net assets of Syms CorpCorp. (the “Company”) as of February 25, 2012, and the related consolidated statement of changes in net assets for the period October 30, 2011 to February 25, 2012.We have audited the accompanying consolidated statements of operations, shareholders’ equity and cash flows for the period February 27, 2010 and2011 to October 29, 2011. We have also audited the accompanying consolidated balance sheet of the Company as of February 28, 200926, 2011, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the threetwo fiscal years in the period ended February 27, 2010. 26, 2011.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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free fromof material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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.
As discussed in Note 1 to the consolidated financial statements, the shareholders of the Company approved a plan of liquidation on November 1, 2011. As a result, the Company changed its basis of accounting from the going concern basis to the liquidation basis of accounting effective October 30, 2011.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated net assets of Syms Corp. as February 25, 2012, the consolidated changes in net assets for the period October 30, 2011 to February 25, 2012, the results of their operations and its cash flows for the period February 27, 2011 to October 29, 2011, the financial position as of Syms Corp at February 27, 2010 and February 28, 2009,26, 2011, and the results of its operations and its cash flows for each of the threetwo fiscal years in the period ended February 27, 2010,26, 2011, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Accounting Oversight Board (United States), Syms Corp’s internal control over financial reporting as of February 27, 2010,25, 2012, based on criteria established inInternal Control – Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated May 13, 201025, 2012 expressed an unqualified opinion thereon.
/s/ BDO Seidman,USA, LLP
BDO Seidman,USA LLP
New York, New York
May 13, 201025, 2012
| F-1 |
| SYMS CORP. |
SYMS CORP.
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS (LIQUIDATION BASIS)
FOR THE PERIOD OCTOBER 30, 2011 TO FEBRUARY 25, 2012
(in thousands)
| Shareholders' Equity at October 29, 2011 | $ | 84,956 | ||
| Liquidation basis adjustments: | ||||
| Adjust assets to estimated net realizable value and liabilities to estimated statement value | 5,056 | |||
| Accrued costs of liquidation | (42,124 | ) | ||
| Subtotal | (37,068 | ) | ||
| Net Assets (liquidation basis) as of October 30, 2011 | 47,888 | |||
| Adjustment to fair value of assets and liabilities | (23,566 | ) | ||
| Adjustment to accrued costs of liquidation | (3,139 | ) | ||
| Subtotal | (26,705 | ) | ||
| Net Assets (liquidation basis as of February 25, 2012 available to common shareholders) | $ | 21,183 |
(In thousands except per share amounts)