UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark one)

x

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

OR

For the fiscal year ended February 27, 2010

OR

o

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACTOF 1934


 

Commission file number 1-8546

SYMS CORP.

Commission file number 1-8546


SYMS CORP

(Exact name of registrant as specified in its charter)


NEW JERSEY

No.   22-2465228

NEW JERSEY

No. 22-2465228

(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:

Title of Each class

Name of Each Exchange on
Which Registered


Title of Each class


Which Registered

Common Stock, $0.05 Par Value Per Share

NASDAQ

OTCQB

Securities registered pursuant to Section 12 (g) of the Act: None

Securities registered pursuant to Section 12 (g) of the Act: None



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act

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
¨

(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

PAGE

PART I

PAGE

PART I

Item 1.
Business2

Item 1A.

Risk Factors

7

Item 1.

Business

2

Item 1A.

Risk Factors

4

Item 1B.

Unresolved Staff Comments

7

11

Item 2.

Properties

8

11

Item 3.

Legal Proceedings

9

11

Item 4.

Reserved

Mine Safety Disclosures

9

11

PART II

Item 5.

Market for the Registrant’s Common Equity, Related Shareholder Stockholder

Matters and Issuer Purchases of Equity Securities

10

12

Item 6.

Selected Financial Data

11

13

Item 7.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

11

14

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

1720

Item 8.

Financial Statements and Supplementary Data

Data.

17

20

Item 9.

Changes in and Disagreements with Accountants on Accounting

and Financial Disclosure

17

Item 9A.

Controls and Procedures

17

Item 9B.

Other Information

20

Item 9A.

Controls and Procedures

20

PART III

Item 9B.
Other Information23

PART III
Item 10.

Directors, Executive Officers and Corporate Governance

20

23

Item 11.

Executive Compensation

20

23

Item 12.

Security Ownership of Certain Beneficial Owners

and Management and Related Stockholder Matters

20

23

Item 13.

Certain Relationships, Related Transactions and Director Independence

20

24

Item 14.

Principal Accountant Fees and Services

20

24

PART IV

Item 15.

Exhibits and Financial Statement Schedules

21

24

Signatures

22


PART I

Item 1.

BUSINESS

27

General

1
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”).

2
SYMS CORP.

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.

3
SYMS CORP.

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.

4
SYMS CORP.

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

44

47

%

Men’s tailored clothes and haberdashery

42

37

%

Children’s wear

apparel

5

%

Luggage, domestics and fragrances

5

%

Shoes

4

6

%

Total


100

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.

5
SYMS CORP.

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.

 

6
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.

Item 1A.

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.

Item 1B.

UNRESOLVED STAFF COMMENTS

None.



Item 2.

PROPERTIES

  

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
or Own

 

Total
Sq Feet

 

Retail &
Ancillary

 

Warehouse
& Office

 

Additional
Space

 


 

 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 &and December 31, 2068.

(a)

Additional space within building currently leased to third parties.

(b)

Additional space consists of a retail strip mall with various tenants in various stages of lease life, including vacant space which is actively marketed by property managers.

(c)

Additional space currently vacant and available for rent.

(d)

Additional space consists of third party building on company land pursuant to ground lease.

2068, respectively.

 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.

 

 

 

 

 

 

 

 

 

Calendar
Period

 

Expiring
Year

 

Leases with
Renewal Options

 

Range in Years
of Option Periods

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

2010

 

5

 

0

 

 

 

2011

 

4

 

3

 

5 years

 

 

2012

 

3

 

3

 

5 years

 

 

2013

 

1

 

1

 

10 years

 

 

2014

 

1

 

0

 

 

 

2015 & thereafter

20

 

10

 

5-10 years

 

          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.

Item 3.

LEGAL PROCEEDINGS

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.

Item 4.

Reserved

11

SYMS CORP.

PART II

Item 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDERSTOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

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

During the period since February 28, 2008, the Company’s Common Stock (the “Common Stock”) has been listed on NASDAQ under the symbol “SYMS”. The following table sets forth the high and low sales prices for the Common Stock as reported by NASDAQ for each quarter of the past two fiscal years.


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended February 27, 2010

 

Year ended February 28, 2009

 

 

 


 


 

 

 

High

 

Low

 

High

 

Low

 

 

 


 


 


 


 

First Quarter

 

$

8.61

 

$

4.22

 

$

16.48

 

$

10.38

 

Second Quarter

 

 

8.57

 

 

5.90

 

 

17.86

 

 

12.33

 

Third Quarter

 

 

8.29

 

 

6.57

 

 

17.24

 

 

7.30

 

Fourth Quarter

 

 

10.00

 

 

7.00

 

 

10.80

 

 

5.38

 


Holders

As of April 14, 2010, there were 317 record holders of the Common Stock.

Dividends

No dividends were paid in fiscal 20082011 or fiscal 2009.2010. Payment of dividends is within the discretion of the Company’s Board of Directors and depends(the “Board”), whose decisions regarding payment of dividends depend upon various factors including the earnings, capital requirements and financial condition of the Company (see Note 45 to Notes tothe Consolidated Financial Statements regarding covenants in the Company’s revolvingbank credit agreement)facility).

Performance Graph

 

Issuer Purchases of Equity Securities

There were no repurchases of the Company’s equity securities during fiscal 2009.

Performance Graph

Below is a graph comparing the cumulative total shareholders’ return on the Common Stock for the last five fiscal years (beginning February 26, 2005March 3, 2007 and ending February 26, 2010,25, 2012, the last trading day for Fiscal 2009)fiscal 2011) with the cumulative total return of the Wilshire 5000 Index and the S&P Retail Composite Index over the same period (assuming (i) the investment of $100 on February 28, 2005March 3, 2007 in the Common Stock and in each of these two Indexes, (ii) reinvestment of all dividends and (iii) no payment of brokerage or other commissions or fees).



Item 6.

SELECTED FINANCIAL DATA

Please note that small volume changes may result in large fluctuations as there are approximately 14.5 million shares outstanding.

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year Ended

 

 

 


 

 

 

February 27,
2010 (1)

 

February 28,
2009

 

March 1,
2008

 

March 3,
2007

 

February 25
2006

 

 

 


 


 


 


 


 

 

 

(in thousands, except per share amounts)

 

Income statement data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

377,309

 

$

242,000

 

$

267,149

 

$

281,178

 

$

280,389

 

Net income (loss) from operations (2)

 

 

(4,842

)

 

(3,993

)

 

2,225

 

 

14,064

 

 

5,275

 

Net income (loss)

 

 

8,308

 

 

(3,423

)

 

807

 

 

9,548

 

 

3,436

 

Net income (loss) per share – basic

 

 

0.57

 

 

(0.23

)

 

0.06

 

 

0.66

 

 

0.23

 

Dividends paid

 

 

 

 

 

 

8,820

 

 

 

 

15,028

 

Net income (loss) per share – diluted

 

 

0.57

 

 

(0.23

)

 

0.05

 

 

0.65

 

 

0.23

 

Balance sheet data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Working capital

 

$

52,798

 

$

43,215

 

$

57,090

 

$

67,431

 

$

81,832

 

Total assets

 

 

269,079

 

 

215,123

 

 

229,629

 

 

239,559

 

 

239,119

 

Long-term liabilities

 

 

11,418

 

 

840

 

 

1,178

 

 

1,548

 

 

1,520

 

Shareholders’ equity

 

 

195,032

 

 

186,043

 

 

192,135

 

 

202,069

 

 

210,534

 

  

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.

Item 7.

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 InventoryInventoryInventory 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 AllowanceThe 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.

17
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.

19
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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments Due by Period

 

 

 

 

 

 











 

 

 

Total

 

Less than
1 year

 

2-3 years

 

4-5 years

 

More than
5 years

 

 

 










 

Contractual Obligations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Leases

 

$

318,061,000

 

$

35,526,000

 

$

65,285,000

 

$

60,832,000

 

$

156,418,000

 

Revolving Credit Facility

 

 

8,402,000

 

 

 

 

 

8,402,000

 

 

 

 

 

 

 

 

 















 

Total Contractual Cash Obligations

 

$

326,463,000

 

$

35,526,000

 

$

73,687,000

 

$

60,832,000

 

$

156,418,000

 

 

 















 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount of Commitment Expiration Per Period

 

 

 


 

 

 

Total Amounts
Committed

 

Within
1 year

 

2-3 years

 

4-5 years

 

After 5
Years

 

 

 










 

Other Commercial Commitments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lines of Credit

 

$

 

$

 

 

 

 

 

 

 

Letters of Credit

 

 

6,552,000

 

 

6,552,000

 

 

 

 

 

 

 

 

 















 

 

Total Commercial Commitments

 

$

6,552,000

 

$

6,552,000

 

 

 

 

 

 

 

 

 















 

          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.

Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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.

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

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.

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE- None


Item 9A.

CONTROLS AND PROCEDURES

 

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.

/s/ Marcy Syms

(c)

/s/ Raymond Siconolfi

Marcy Syms

Raymond Siconolfi

Chairman and Chief Executive Officer

Controller and ChiefReport of Independent Registered Public Accounting Officer

Firm

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



Item 9B.

OTHER INFORMATION - None.

22
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.

Item 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

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.

Item 11.

EXECUTIVE COMPENSATION

 

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.

Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

23
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.

 

 

 

 

 

 

 

 

 

 

 

 

 

COLUMN (A)

 

COLUMN (B)

 

COLUMN (C)

 

 

 


 


 


 

 

 

Securities to be issued upon
exercise of outstanding
Options

 

Weighted average exercise
price of outstanding options

 

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

 

 

 

 

 


 


 


 


Item 13.

CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

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.

Item 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

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.


PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

PAGE NUMBER

Item 15.

(a)(1)

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


PAGE NUMBER

(a)(1)

Financial Statements filed as part of this Annual Report:

Report of Independent Registered Public Accounting Firm

F-1

Balance Sheets

Consolidated Statement of Changes in Net Assets (Liquidation Basis) for the Period October 30, 2011 to February 25, 2012

F-2

Consolidated Statement of Net Assets as of February 25, 2012 (Liquidation Basis) and Consolidated Balance Sheet as of February 26, 2011 (Going Concern Basis)

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)

F-3

F-4

Consolidated Statements of Shareholders’ Equity

for the Eight-Month Period Ended October 29, 2011 and the Fiscal Years Ended February 26, 2011 and February 27, 2010 (Going Concern Basis)

F-4

F-5

Consolidated Statements of Cash Flows

for the Eight-Month Period Ended October 29, 2011 and the Fiscal Years Ended February 26, 2011 and February 27, 2010 (Going Concern Basis)

F-5

F-6

Notes to Consolidated Financial Statements

F-6

F-7

(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)

Report of Independent Registered Public Accounting Firm on Schedule II.

Schedule II: Valuation and qualifying accounts

Schedules, other than those 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)

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, Filene’sFilene's Basement, Inc. and FB Leasing Services (exhibit 10.1 to Current Report on Form 8-K dated June 24, 2009).

 

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

3.1

Certificate of Incorporation of Syms Corp, as filed inCorp. and amendment to the Registration Statement.

Certificate of Incorporation(exhibit 3.1 to Annual Report of Form 10-K for the year ended February 26, 2011).

 

3.2

Amended and Restated By-laws of Syms CorpCorp. (exhibit 3.1 to Current Report on Form 8-K dated January 12, 2009).

 

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)

.

 

10.4

10.4†

Syms CorpCorp. 2005 Stock Option Plan, as amended (exhibit 10.4 to Current Report on Form 8-K dated August 5, 2005)

.

 

10.4.1

10.4.1†

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)

.

 

10.4.2

10.4.2†

Form of Incentive Option Award for 2005 Stock Option Plan (exhibit 10.2 to Current Report on Form 8-K dated August 5, 2005)

.

 

10.4.3

10.4.3†

Form of Restricted Stock Award for 2005 Stock Option Plan (exhibit 10.3 to Current Report on Form 8-K dated August 5, 2005)

.

 

10.5

10.5+

Credit Agreement, dated as of August 27, 2009, by and among Syms Corp,Corp., SYL LLC, the guarantors party thereto from time to time, (iii) the lenders party thereto from time to time and (iv) Bank of America, N.A., as administrative agent, collateral agent and letter of credit issuer (the “Credit Agreement”) (exhibit 10.5 to Amendment No. 1 to the Annual Report on Form10-K/A datedDecember 27, 2011).

10.6First Amendment to the Credit Agreement, dated as of January 7, 2011 (exhibit 10.1 to Current Report on Form 8-K dated September 1, 2009)

January 7, 2011).

 

10.7Second 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).

 

10.8Third 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).

21.1*

25
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).

21.1List of Subsidiaries

(exhibit 21.1 to Annual Report on Form 10-K dated May 13, 2011).

 

23.1*

Consent of BDO Seidman, LLP

USA, LLP.

 

31.1*

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

2002.

 

31.2*

Certification of Chief AccountingFinancial Officer pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

2002.

 

32.1*

Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities and Exchange Act of 1934 and 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

2002.

 

32.2*

Certification of Chief AccountingFinancial Officer pursuant to Rule 13a-14(b) under the Securities and Exchange Act of 1934 and 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

2002.

SIGNATURES

 

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: 

SYMS CORP

By: 

/s/ Marcy Syms


Marcy Syms

Marcy Syms

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

Signature

Title

Date




/s/ Marcy Syms

Chairman of the Board/ Chief Executive Officer and Director
(Principal executive officer)

May 13, 2010

25, 2012

Marcy Syms

and Director (Principal executive officer)

Marcy Syms

/s/ Gary Binkoski

Chief Financial Officer

May 25, 2012

/s/ Raymond Siconolfi

Gary Binkoski

Controller and Chief Accounting Officer

May 13, 2010


(Principal financial and accounting officer)

/s/ Bernard  H. Tenenbaum

Director

May 13, 2010

25, 2012

Bernard H. Tenenbaum

/s/ Thomas E. Zanecchia

Director

May 13, 2010

25, 2012

Thomas E. Zanecchia

/s/ Henry M. Chidgey

Director

May 13, 2010

25, 2012

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, LLP
New York, New York
May 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.

 

SYMS CORP

Valuation and qualifying accounts

(2)

Fiscal years ended February 27, 2010, February 28, 2009 and March 1, 2008


Deductions for fiscal 2011 reflects the full liquidation of the inventory.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal 2007

 

 

4,201,000

 

 

 

 

 

 

(1,381,000

)

 

2,820,000

 

Fiscal 2008

 

 

2,820,000

 

 

 

 

 

 

(624,000

)

 

2,196,000

 

Fiscal 2009

 

 

2,196,000

 

 

2,603,313

 

 

 

 

 

(398,000

)

 

4,401,313

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax valuation allowance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal 2007

 

 

 

 

 

 

 

 

 

 

 

Fiscal 2008

 

 

 

 

 

 

 

 

 

 

 

Fiscal 2009

 

 

 

 

 

 

346,000

 

 

 

 

 

346,000

 

(3)The change for fiscal 2011 reflects a full valuation allowance against the Company's deferred tax assets.


29
SYMS CORP.

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30
SYMS CORP.

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders
SYMS 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 

 

Consolidated Balance Sheets


(In thousands except per share amounts)


 

 

 

 

 

 

 

 

 

 

February 27,
2010

 

February 28,
2009

 

 

 


 


 

ASSETS

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,049

 

$

1,822

 

Receivables

 

 

3,195

 

 

1,589

 

Merchandise inventories - net

 

 

82,234

 

 

52,480

 

Deferred income taxes

 

 

5,912

 

 

3,045

 

Assets held for sale

 

 

14,392

 

 

7,202

 

Prepaid expenses and other current assets

 

 

7,645

 

 

5,317

 

 

 



 



 

TOTAL CURRENT ASSETS

 

 

115,427

 

 

71,455

 

 

 



 



 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT - Net

 

 

118,539

 

 

95,956

 

DEFERRED INCOME TAXES

 

 

18,113

 

 

15,209

 

BUILDING AND AIR RIGHTS

 

 

9,134

 

 

9,134

 

OTHER ASSETS

 

 

7,866

 

 

23,369

 

 

 



 



 

TOTAL ASSETS

 

$

269,079

 

$

215,123

 

 

 



 



 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

Accounts payable

 

$

47,356

 

$

14,936

 

Accrued expenses

 

 

9,945

 

 

9,012

 

Obligations to customers

 

 

5,328

 

 

4,292

 

 

 



 



 

TOTAL CURRENT LIABILITIES

 

 

62,629

 

 

28,240

 

 

 



 



 

 

OTHER LONG TERM LIABILITIES

 

 

3,016

 

 

840

 

 

 

 

 

 

 

 

 

LONG TERM DEBT

 

 

8,402

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Preferred stock, par value $100 per share. Authorized 1,000 shares; none outstanding

 

 

 

 

 

Common stock, par value $0.05 per share. Authorized 30,000 shares; 14,598 shares outstanding (net of 4,298 treasury shares) as of February 27, 2010, and 14,590 shares outstanding (net of 4,298 treasury shares) as of February 28, 2009.

 

 

800

 

 

800

 

Additional paid-in capital

 

 

21,605

 

 

21,560

 

Treasury stock

 

 

(45,903

)

 

(45,903

)

Accumulated Other Comprehensive Income

 

 

(1,491

)

 

(2,127

)

Retained earnings

 

 

220,021

 

 

211,713

 

 

 



 



 

TOTAL SHAREHOLDERS’ EQUITY

 

 

195,032

 

 

186,043

 

 

 



 



 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

269,079

 

$

215,123

 

 

 



 



 

See Notes to Consolidated Financial Statements



F-2
SYMS CORP.

SYMS CORP.

CONSOLIDATED STATEMENT OF NET ASSETS AS OF FEBRUARY 25, 2012 (LIQUIDATION BASIS)

CONSOLIDATED BALANCE SHEET AS OF FEBRUARY 26, 2011 (GOING CONCERN BASIS)

(in thousands except per share data)

  February 25,  February 26, 
  2012  2011 
       
ASSETS        
CURRENT ASSETS        
Cash and cash equivalents $26,304  $2,298 
Receivables  2,716   2,619 
Merchandise inventories  -   76,595 
Deferred income taxes  -   9,180 
Assets held for sale  -   1,900 
Prepaid expenses and other current assets  9,533   7,345 
Owned real estate, including air rights  139,631   - 
         
TOTAL CURRENT ASSETS  178,184   99,937 
         
OWNED REAL ESTATE, including air rights  -   71,390 
EQUIPMENT  -   54,944 
DEFERRED INCOME TAXES  -   37,086 
OTHER ASSETS  -   7,417 
         
TOTAL ASSETS $178,184  $270,774 
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
CURRENT LIABILITIES:        
Accounts payable $30,556  $41,701 
Accrued expenses  32,975   21,114 
Accrued liquidation costs  32,316   - 
Other liabilities, primarily lease settlement costs  56,547   - 
Obligations to customers  4,607   5,559 
         
TOTAL CURRENT LIABILITIES  157,001   68,374 
         
LONG TERM DEBT  -   30,192 
         
OTHER LONG TERM LIABILITIES  -   11,229 
         
SHAREHOLDERS EQUITY        
Preferred stock, par value $100 per share.  Authorized 1,000 shares; none outstanding  -   - 
Common stock, par value $0.05 per share.  Authorized 30,000 shares; 14,448 shares outstanding (net of 4,448 in treasury shares) on February 25, 2012 and February 26, 2011  -   800 
Additional paid-in capital  -   21,605 
Treasury stock  -   (47,110)
Accumulated other comprehensive loss  -   (1,480)
Retained earnings  -   187,164 
TOTAL SHAREHOLDERS' EQUITY  -   160,979 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $157,001  $270,774 
Net assets (liquidation basis - available to common shareholders) $21,183     

 

Consolidated Statements of Operations


(In thousands, except per share amounts)


 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year Ended

 

 

 


 

 

 

February 27,
2010

 

February 28,
2009

 

March 1,
2008

 

 

 


 


 


 

 

Net sales

 

$

377,309

 

$

242,000

 

$

267,149

 

Cost of goods sold

 

 

232,207

 

 

141,475

 

 

157,168

 

 

 



 



 



 

Gross profit

 

 

145,102

 

 

100,525

 

 

109,981

 

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

113,908

 

 

74,690

 

 

76,959

 

Advertising

 

 

8,193

 

 

6,339

 

 

8,561

 

Occupancy, net

 

 

45,087

 

 

15,557

 

 

14,323

 

Depreciation and amortization

 

 

11,414

 

 

8,003

 

 

7,659

 

Asset impairment charge

 

 

80

 

 

530

 

 

745

 

Bargain purchase gain

 

 

(9,714

)

 

 

 

 

Acquisition costs

 

 

4,857

 

 

 

 

 

Gain from life insurance proceeds and other income

 

 

(25,049

)

 

(53

)

 

(491

)

(Gain) loss on disposition of assets

 

 

1,168

 

 

(548

)

 

 

 

 



 



 



 

Total expenses

 

 

149,944

 

 

104,518

 

 

107,756

 

 

 



 



 



 

Net income (loss) from operations

 

 

(4,842

)

 

(3,993

)

 

2,225

 

 

 

 

 

 

 

 

 

 

 

 

Interest (expense) income

 

 

(1,538

)

 

(38

)

 

911

 

 

 



 



 



 

Net income (loss) before income taxes

 

 

(6,380

)

 

(4,031

)

 

3,136

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

 

(14,688

)

 

(608

)

 

2,329

 

 

 



 



 



 

Net income (loss)

 

$

8,308

 

$

(3,423

)

$

807

 

 

 



 



 



 

Net income (loss) per share - basic

 

$

0.57

 

$

(0.23

)

$

0.06

 

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

 

14,593

 

 

14,589

 

 

14,659

 

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share - diluted

 

$

0.57

 

$

(0.23

)

$

0.05

 

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - diluted

 

 

14,593

 

 

14,589

 

 

14,760

 

 

 



 



 



 

See Notes to Consolidated Financial Statements



F-3
SYMS CORP.

SYMS CORP.

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)

(in thousands, except per share amounts)

  For the  For the  For the 
  Eight Months  Fiscal Year  Fiscal Year 
  Ended  Ended  Ended 
  October 29, 2011  February 26, 2011  February 27, 2010 
          
Net sales $258,214  $445,133  $377,309 
Cost of goods sold  158,029   271,341   232,207 
Gross profit  100,185   173,792   145,102 
             
Expenses:            
Selling, general and administrative  76,081   124,385   109,460 
Advertising  2,476   7,021   8,193 
Occupancy, net  43,120   64,203   49,535 
Depreciation and amortization  9,819   14,581   11,414 
Gain on disposition of assets  (7,565)  457   1,168 
Asset impairment charges  -   4,255   80 
Acquisition costs  -   -   4,857 
Bargain purchase gain  -   -   (9,714)
Gain from life insurance proceeds and other expense (income)  4,815   (36)  (25,049)
Restructuring charges  -   9,306   - 
Total operating expenses  128,746   224,172   149,944 
             
Loss from operations  (28,561)  (50,380)  (4,842)
             
Interest expense, net  1,062   1,366   1,538 
             
Loss before income taxes  (29,623)  (51,746)  (6,380)
             
Income tax expense (benefit)  46,404   (18,889)  (14,688)
             
Net (loss) income $(76,027) $(32,857) $8,308 
             
Net (loss) income per share - basic and diluted $(5.26) $(2.27) $0.57 
             
Weighted average shares outstanding - basic and diluted  14,448   14,456   14,593 

 

SYMS CORP

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


(In thousands)


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional
Paid-in
Capital

 

 

 

 

 

Accumulated
Other Com-
prehensive
Income (Loss)

 

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

 

 

 

 

 

 


 

 


 

Retained
Earnings

 

 

 

 

 

 

Shares

 

Amount

 

 

Shares

 

Amount

 

 

 

Total

 

 

 


 


 


 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AS OF
March 3, 2007

 

18,669

 

$

789

 

$

19,264

 

(3,968

)

$

(41,383

)

$

223,399

 

$

 

$

202,069

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of options

 

1

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

4

 

Tax benefit derived from exercise of options

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

5

 

Stock buyback

 

 

 

 

 

 

(114

)

 

(1,703

)

 

 

 

 

 

(1,703

)

Payment of dividends

 

 

 

 

 

 

 

 

 

 

(8,820

)

 

 

 

(8,820

)

FIN 48 reserve

 

 

 

 

 

 

 

 

 

 

(250

)

 

 

 

(250

)

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

807

 

 

 

 

807

 

Deferred pension gain, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

23

 

 

23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

830

 

 

 


 



 



 


 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AS OF
March 1, 2008

 

18,670

 

$

789

 

$

19,273

 

(4,082

)

$

(43,086

)

$

215,136

 

$

23

 

$

192,135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of options

 

218

 

 

11

 

 

2,137

 

 

 

 

 

 

 

 

 

2,148

 

Tax benefit derived from exercise of options

 

 

 

 

 

150

 

 

 

 

 

 

 

 

 

150

 

Stock buyback

 

 

 

 

 

 

(216

)

 

(2,817

)

 

 

 

 

 

(2,817

)

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss)

 

 

 

 

 

 

 

 

 

 

(3,423

)

 

 

 

(3,423

)

Deferred pension (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

(2,150

)

 

(2,150

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Total comprehensive (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,682

)

 

 


 



 



 


 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AS OF
February 28, 2009

 

18,888

 

$

800

 

$

21,560

 

(4,298

)

$

(45,903

)

$

211,713

 

$

(2,127

)

$

186,043

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of options

 

9

 

 

 

 

 

45

 

 

 

 

 

 

 

 

 

 

 

 

 

45

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

8,308

 

 

 

 

8,308

 

Deferred pension gain, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

636

 

 

636

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,944

 

 

 


 



 



 


 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AS OF
February 27, 2010

 

18,896

 

$

800

 

$

21,605

 

(4,298

)

$

(45,903

)

$

220,021

 

$

(1,491

)

$

195,032

 

 

 


 



 



 


 



 



 



 



 

See Notes to Consolidated Financial Statements



F-4
SYMS CORP.

SYMS CORP.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY 

FOR THE EIGHT MONTH PERIOD ENDED OCTOBER 29, 2011 AND

THE FISCAL YEARS ENDED FEBRUARY 26, 2011 AND FEBRUARY 27, 2010

(in thousands)

                    Accumulated    
                    Other    
  Common Stock  Additional  Treasury Stock  Retained  Comprehensive    
  Shares  Amount  Paid-In Capital  Shares  Amount  Earnings  Income (Loss)  Total 
                         
Balance as of February 28, 2009  18,888  $800  $21,560   (4,298) $(45,903) $211,713  $(2,127) $186,043 
                                 
Exercise of Options  8   -   45   -   -   -   -   45 
Comprehensive income:                                
Net Income  -   -   -   -   -   8,308   -   8,308 
Deferred pension, net of tax  -   -   -   -   -   -   636   636 
Total comprehensive income  -   -   -   -   -   -   -   8,944 
Balance as of February 27, 2010  18,896  $800  $21,605   (4,298) $(45,903) $220,021  $(1,491) $195,032 
                                 
Stock Buy-Back  -   -   -   (150)  (1,207)  -   -   (1,207)
Comprehensive income:                                
Net loss  -   -   -   -   -   (32,857)  -   (32,857)
Deferred pension, net of tax  -   -   -   -   -   -   11   11 
Total comprehensive loss  -   -   -   -   -   -   -   (32,846)
Balance as of February 26, 2011  18,896  $800  $21,605   (4,448) $(47,110) $187,164  $(1,480) $160,979 
                                 
                                 
Comprehensive income:                                
Net loss  -   -   -   -   -   (76,027)  -   (76,027)
Deferred pension, net of tax  -   -   -   -   -   -   4   4 
Total comprehensive loss  -   -   -   -   -   -   -   (76,023)
Balance as of October 29, 2011  18,896  $800  $21,605   (4,448) $(47,110) $111,137  $(1,476) $84,956 

 

Consolidated Statements of Cash Flows


(In thousands)


 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year Ended

 

 

 


 

 

 

February 27,
2010

 

February 28,
2009

 

March 1,
2008

 

 

 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

8,308

 

$

(3,423

)

$

807

 

 

 



 



 



 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

11,414

 

 

8,003

 

 

7,659

 

Asset impairment

 

 

80

 

 

530

 

 

745

 

Bargain purchase gain

 

 

(9,714

)

 

 

 

 

Deferred income taxes

 

 

(9,316

)

 

(615

)

 

(497

)

(Gain) loss on disposition of assets

 

 

1,168

 

 

(503

)

 

10

 

(Increase) decrease in operating assets, net of Filene’s acquisition:

 

 

 

 

 

 

 

 

 

 

Receivables

 

 

(1,606

)

 

856

 

 

(719

)

Merchandise inventories

 

 

(8,438

)

 

13,606

 

 

(2,277

)

Prepaid expenses and other current assets

 

 

(1,827

)

 

(1,170

)

 

907

 

Other assets

 

 

1,078

 

 

(1,995

)

 

(2,152

)

Increase (decrease) in operating liabilities, net of Filene’s acquisition:

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

32,420

 

 

(10,674

)

 

3,932

 

Accrued expenses

 

 

5,703

 

 

(262

)

 

(2,522

)

Obligations to customers

 

 

(160

)

 

(151

)

 

485

 

Other long term liabilities

 

 

2,176

 

 

(338

)

 

(370

)

Income taxes

 

 

(4,409

)

 

(940

)

 

(1,732

)

 

 



 



 



 

Net cash provided by operating activities

 

 

26,877

 

 

3,215

 

 

4,276

 

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Investment in building and air rights

 

 

 

 

(6,034

)

 

(3,100

)

Purchase of Filene’s Basement

 

 

(38,927

)

 

 

 

 

Expenditures for property and equipment

 

 

(12,224

)

 

(7,667

)

 

(6,687

)

Proceeds from sale of land and other assets

 

 

54

 

 

923

 

 

17

 

 

 



 



 



 

Net cash used in investing activities

 

 

(51,097

)

 

(12,778

)

 

(9,770

)

 

 



 



 



 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Cash surrender value advance

 

 

16,000

 

 

 

 

 

Payment of dividend

 

 

 

 

 

 

(8,820

)

Exercise of stock options

 

 

45

 

 

2,148

 

 

4

 

Stock repurchase

 

 

 

 

(2,817

)

 

(1,703

)

Tax benefit of options

 

 

 

 

150

 

 

5

 

Borrowings on revolving credit facilities

 

 

51,494

 

 

 

 

 

 

 

Repayments on revolving credit facilities

 

 

(43,092

)

 

 

 

 

 

 



 



 



 

Net cash provided by (used in) financing activities

 

 

24,447

 

 

(519

)

 

(10,514

)

 

 



 



 



 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENT

 

 

227

 

 

(10,082

)

 

(16,008

)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

1,822

 

 

11,904

 

 

27,912

 

 

 



 



 



 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

2,049

 

$

1,822

 

$

11,904

 

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

 

 

Interest

 

$

975

 

$

170

 

$

166

 

 

 



 



 



 

See Notes to Consolidated Financial Statements



F-5

Notes to Consolidated Financial Statements

SYMS CORP.

SYMS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE EIGHT MONTH PERIOD ENDED OCTOBER 29, 2011  AND

THE FISCAL YEARS  ENDED FEBRUARY 26, 2011 AND FEBRUARY 27, 2010

(GOING CONCERN BASIS)

(in thousands)

  For the Eight  For the  For the 
  Months Ended  Fiscal Year  Fiscal Year 
  October 29, 2011  February 26, 2011  February 27, 2010 
          
CASH FLOWS FROM OPERATING ACTIVITIES            
Net (loss) income $(76,027) $(32,857) $8,308 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities            
Depreciation and amortization  9,819   14,581   11,414 
Asset impairment  -   4,255   80 
Bargain purchase gain  -   -   (9,714)
Deferred income taxes  46,266   (22,241)  (9,316)
(Gain) loss on disposition of assets  (7,565)  457   1,168 
(Increase) decrease in operating assets:            
Receivables  (618)  576   (1,606)
Merchandise inventories  15,938   5,640   (8,438)
Prepaid expenses and other current assets  4,332   299   (1,827)
Other assets  (838)  (242)  1,078 
Increase (decrease) in operating liabilities:            
Accounts payable  (6,359)  (5,655)  32,420 
Accrued expenses  3,342   4,867   5,703 
Obligations to customers  (127)  231   (160)
Other long term liabilities  1,830   8,213   2,176 
Income taxes  -   6,318   (4,409)
Net cash (used in) provided by operating activities  (10,007)  (15,558)  26,877 
             
CASH FLOWS FROM INVESTING ACTIVITIES:            
Purchase of Filene's Basement  -   -   (38,927)
Expenditures for property and equipment  (1,154)  (15,540)  (12,224)
Proceeds from sale of land, building and other assets  22,023   10,764   54 
Net cash provided by (used in) investing activities  20,869   (4,776)  (51,097)
             
CASH FLOWS FROM FINANCING ACTIVITIES:            
Cash surrender value advance  -   -   16,000 
Exercise of stock options  -   -   45 
Purchase of treasury shares  -   (1,207)  - 
(Repayment) borrowings on revolving credit facility (net)  (10,885)  21,790   8,402 
Net cash (used in) provided by financing activities  (10,885)  20,583   24,447 
             
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS  (23)  249   227 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD  2,298   2,049   1,822 
CASH AND CASH EQUIVALENTS, END OF PERIOD $2,275  $2,298  $2,049 
             
SUPPLEMENTAL CASH FLOW INFORMATION:            
Cash paid during the period for:            
Interest $1,228  $1,387  $975 
             
Income taxes (net of refunds) $(119) $(2,702) $506 

See Notes to Consolidated Financial Statements


F-6

FISCAL YEARS ENDED FEBRUARY 27, 2010, FEBRUARY 28, 2009 AND MARCH 1, 2008

SYMS CORP.

Notes to Consolidated Financial Statements

NOTE 1 – BASIS OF PRESENTATION

Disposition of the Company’s and Filene’s Businesses

On November 2, 2011, Syms Corp. and its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of Title 11 of the United States Code (“Bankruptcy Code” or “Chapter 11”) in the United States Bankruptcy Court for the District of Delaware (“Court”).

Prior to November 2, 2011, all of the Company’s and Filene’s business operations consisted primarily of 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 and 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 cease to exist.

At a meeting held on November 1, 2011, the Company’s Board of Directors determined that it was in the best interests of the Company and its shareholders for it and its subsidiaries to file voluntary petitions for reorganization under Chapter 11 and liquidate the retail operations. On November 2, 2011, the Company and Filene’s filed for voluntary petitions for reorganization under Chapter 11 in Delaware.

If the Company and Filene’s are able to generate value in excess of what is needed to satisfy all of their obligations, the Company will distribute any such excess to shareholders; the actual amount and timing of future distributions, if any, to shareholders, will depend upon a variety of factors, including, but not limited to, disposal of real estate assets, and ultimate settlement amounts of the Company’s and Filene’s liabilities and obligations, including lease obligations and actual costs incurred in connection with the Chapter 11 case. In response to the Chapter 11 filing the Company adopted 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 to November 1, 2011 were not material.

The consolidated financial statements for the period ended October 29, 2011 were prepared on the going concern basis of accounting, which contemplated realization of assets and satisfaction of liabilities in the normal course of business. In the opinion of management, the accompanying Statements of Operations and Cash Flows for the period ended October 29, 2011 contain all adjustments, including normal recurring adjustments, necessary to present fairly the shareholders’ equity of the Company as of October 29, 2011.

Description of Former Business Operations

The Company’s 46 stores offered a broad range of “off-price” first quality, in-season merchandise consisting primarily of, women’s dresses, suits, separates and accessories, men’s tailored clothing and haberdashery, children’s apparel, luggage, domestics and fragrances and shoes. The stores emphasized first quality, nationally recognized designer and brand name merchandise at prices substantially below those generally found in department and specialty stores. The stores carried a wide selection of sizes and styles of men’s, women’s and children’s wear. In addition several stores also carried a selection of fine jewelry.

The Company had no foreign operations. No material part of the Company’s revenues was received from a single customer or group of customers. Please refer to Note 2 of the Notes to Consolidated Financial Statements for information on segment reporting.

Liquidation Basis of Accounting

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 effective on October 30, 2011. Under this basis of accounting, assets and liabilities are stated at their net realizable value and estimated costs over the anticipated period of liquidation are accrued to the extent reasonably determinable.

F-7
SYMS CORP.

Notes to Consolidated Financial Statements, continued

The transition from the going concern basis of accounting to the liquidation basis of accounting required management to make significant estimates and judgments. The recording of assets at estimated net realizable value and liabilities at estimated settlement amounts under the liquidation basis of accounting required the Company to record the following adjustments as of October 30, 2011, (in thousands):

Adjust assets and liabilities Amount 
    
Write up of real estate to estimated net realizable value $(78,604)
Estimated lease settlement costs  51,150 
Write down of other fixed assets  35,567 
Reversal of existing deferred rent liability  (8,741)
Write up of inventory to net realizable value  (6,063)
Write down of pre paid assets  3,000 
Other liquidation adjustments  (1,365)
Total $(5,056)

The Company adjusted the real estate assets to reflect the estimated net realizable value of owned property. This value was estimated, with the input of a third party valuation expert, by assessing several possible sales alternatives and weighting the estimated value realized in each of those alternatives according to management’s best estimate of the likelihood of each alternative being achieved. These alternatives included selling the properties in the short term as vacant, unleased properties and selling the properties within two to three years after having identified and secured new tenants. These sales alternatives produced a possible range of net realizable values between $135.0 million and $185.0 million. The basis for determining this range of estimated net realizable values took into consideration many factors which are difficult to predict, including but not limited to local market conditions, vacancy rates, redevelopment opportunities, investor types/profiles, and anticipated timing of sale transactions. Based on management’s weighting of the likelihood of each alternative being achieved an estimated net realizable value of real estate of $146.8 million was recorded at October 30, 2011. While this amount represents management’s best estimate at the time of finalizing the accompanying statement of net assets, the amount ultimately realized in the sale of the real estate could materially differ from this estimate. However, this estimate should not be construed as a final determination by the Company to liquidate all its owned real estate.

As of November 15, 2011, the Company and Filene’s entered into an agency agreement to liquidate all of their inventory, furniture and fixtures.   The agent guaranteed the debtors’ receipt of 90% of the aggregate cost value of merchandise, subject to certain inventory levels and cost factor adjustments.  In addition, the agent agreed to a furniture and fixture guarantee of $2 million.

As a result of the adoption of the liquidation basis of accounting, the Company recorded the estimated cost for settling the existing leases at a total of $56.6 million, adjusted for the Company’s settlement to terminate its lease at 530 Fifth Avenue, which settlement was approved by the Bankruptcy Court on January 6, 2012. This required an accrual of $51.1 million at October 30, 2011, in addition to the lease exit accrual already recorded for the Paramus and Plano locations of $5.5 million.

The Company and Filene’s reviewed all other remaining operating expenses and contractual commitments such as payroll and related expenses, lease termination costs, professional fees and other outside services to determine their best estimate of costs to be incurred during the liquidation period.

The Company and Filene’s were required to make significant estimates and exercise judgment in determining the accrued costs of liquidation at October 30, 2011 and February 25, 2012. Upon transition to the liquidation basis of accounting, the Company and Filene’s accrued the following costs expected to be incurred in liquidation (in thousands):

F-8
SYMS CORP.

Notes to Consolidated Financial Statements, continued

Estimated costs of liquidation            
             
  Balance at  Adjustments     Balance at 
  October 30, 2011  to Reserves  Payments  February 25, 2012 
                 
Real estate related carrying costs $14,267  $(4,918) $(1,699) $7,650 
Professional fees  16,868   7,210   (1,158)  22,920 
Payroll related costs  7,775   2,123   (8,321)  1,577 
                 
Other  3,214   (1,276)  (1,769)  169 
                 
TOTAL $42,124  $3,139  $(12,947) $32,316 

The Company reviewed all operating expenses and contractual commitments such as payroll and related expenses, lease terminations cost, owned property carrying costs as well as professional fees to determine the estimated costs to be incurred during the liquidation period. The liquidation period, as recorded in the third quarter, was anticipated to conclude in October 2012, and since has been amended to conclude in August 2012.

The reserve for real estate carrying costs decreased by approximately $4.9 million in total, partially due to timing differences of the wind-down period as well as expense reimbursements from the third party liquidator. Utilities, maintenance and real estate expenses were partially offset by the store closure/going out of business sale agreement with Gordon Brothers which resulted in a $2.0 million dollar reduction in the reserve. In addition the liquidation period was planned through October 2012 and is currently anticipated to conclude in August 2012 resulting in $1.8 million in savings.Outside services for real estate brokerage fees, leasing commissions and legal and selling expenses have also been reduced by approximately $1.1 million.

Professional fees during the liquidation period increased by $7.2 million from $16.9 million to $22.9 million. The initial budget reflected an eleven month process to liquidate the entire estate. The plan reflects the debtors as well as the unsecured creditors and the equity committee’s advisors, the hiring of a fee examiner and has increased due to the complexities of litigating the estate.

The initial payroll and related liquidation expenses included in the accrued costs of liquidation increased by $2.1 million for the period October 30, 2011 through February 25, 2012. This increase is principally attributed to higher than anticipated payroll expense and related benefits in the first four months of the liquidation period, partially offset by reduced costs due to winding down earlier than anticipated.

Other liquidation expenses include general operating expense of the corporate facility as well as information technology and communication expenses related to the corporate facility. These liquidation costs were estimated at $1.6 million and have been reduced to $0.3 million resulting in a savings of $1.3 million to the estate.

F-9
SYMS CORP.

Notes to Consolidated Financial Statements, continued

Adjustments To Net Realizable Value

The following table summarizes adjustments to Net Realizable Value under liquidation basis of accounting

(in thousands):

Adjustment of Assets and Liabilities to Net Realizable Value October 30, 2011
Through
February 25, 2012
 
Adjust pension liability $11,970 
Adjust real estate to estimated net realizable value  7,189 
Adjust liability to restore properties  5,184 
Adjust other liquidation costs  4,619 
Adjust other fixed assets to net realizable value  (18)
Adjust write up of inventory to net realizable value  (2,314)
Adjust estimated lease settlement costs to net realizable value  (3,064)
  $23,566 

Pension -The Company had a defined Pension Plan for all employees other than those covered under the Collective Bargaining Agreement through December 31, 2006. The Pension Plan was frozen effective December 31, 2006. As of February 25, 2012, the Company accrued $7.9 million which represents the estimated cost to make the plan whole and subsequently terminate the plan under a standard termination. The company had contemplated other courses of action, including a distress termination, where-by the Pension Benefit Guarantee Corporation (“PBGC”) takes over the plan. However the estimated total cost associated with a distress termination was approximately $15 million. As a result of the cost savings associated with the standard termination approach, the Company has elected a standard termination and reflected the total estimated cost accordingly.

Certain employees covered by collective bargaining agreements, participated in a multi employee pension plan in accordance with the Multi Employer Pension Plan Amendment Act of 1980 (MPPAA). Syms ceased to have an obligation to contribute to these plans in 2012. Under the law, the Company has effected a complete withdrawal from the funds, within the meaning of Section 4203(a) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Consequently, the Company is subject to the payment of a withdrawal liability to these pension funds. The additional costs have been estimated at approximately $6.4 million for the multi employee pension plans that is reflected in the adjustments to assets and liabilities to net realizable value. The withdrawal liability is only an estimate at this time and may or may not result in higher costs when the actuarial valuation for the most recent plan year (2012) is completed.

The combined adjustments for the single employer pension liability of $5.5 million and the multi employee pension plans of $6.4 million resulted in a pension liability adjustment of $12.0 million.

Real Estate -The net realizable value of real estate assets was adjusted downward in aggregate by $7.2 million to reflect the current collective belief of the Company and third party real estate experts. The basis for determining the estimated net realizable values took into consideration many factors which are difficult to predict, including but not limited to local market conditions, vacancy rates, redevelopment opportunities, investor types/profiles, and anticipated timing of sale transactions. Based on management’s weighting of the likelihood of each alternative being achieved an estimated net realizable value of real estate of $139.6 million was recorded. While this amount represents management’s best estimate at the time of finalizing the accompanying statement of net assets, the amount ultimately realized in the sale of the real estate could materially differ from this estimate. However, this estimate should not be construed as a final determination by the Company to liquidate all its owned real estate.

Liability to restore properties -It has been estimated that adjustments of $5.2 million will be required to restore certain properties to a salable condition: for Trinity location $2.0 million for renovations and repairs to ensure the property has been brought back to a landmark status, $1.9 million for repairs at the Broadway location, an additional $1.0 million for the Park Avenue location for elevator and escalator repairs, and $0.3 million for the Houston location roof repair.

F-10
SYMS CORP.

Notes to Consolidated Financial Statements, continued

Other liquidation assets -Expenses related to the wind-down of the company have increased by $4.6 million, primarily due to increases in professional fee estimates offset by real estate carrying costs.

Lease settlement costs -Lease settlement costs have decreased by $3.1 million primarily driven by a decrease of $5.4 million for the Broadway location as this lease was assumed by DSW, partially offset by an increase in the lease liability claim at the Union Square location of $3.1 million.

Financial Position

The Company and Filene’s believe that cash provided from the liquidation process could provide sufficient liquidity to fund their day-to-day cost of liquidation provided that they are able to sell their remaining assets (which consist primarily of owned real estate inclusive of the Company’s corporate headquarters in Secaucus, New Jersey) at anticipated selling prices and within a reasonable period of time.

If the Company and Filene’s are unable to sell their assets in a reasonable period of time, or if they receive substantially less than anticipated, their ability to settle their liabilities and obligations in full while incurring necessary wind-down costs would be in doubt.

Through the estimated liquidation period, if the Company is able to generate cash proceeds in excess of what is needed to satisfy all of the Company’s obligations, the Company will distribute any such excess proceeds to shareholders. Whether there will be any excess cash proceeds for distribution to shareholders is subject to a number of material risks and uncertainties that may prevent any such distribution from occurring. Accordingly, while the Company believes that a cash distribution is possible, actual results may differ from current estimates, perhaps materially, possibly resulting in no excess cash proceeds being available for distribution to shareholders. Moreover, the Company continues to consider other possible strategic alternatives other than liquidation of its assets.

NOTE 12 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


 

Liquidation Basis of Accounting

 

a.

Principal Business - Syms Corp (the “Company”) operatesThe liquidation basis of accounting is appropriate when the liquidation of a chaincompany appears imminent and the net realizable value of 27 “off-price” retail clothing stores located in the Northeastern and Middle Atlantic regions and in the Midwest, Southeast and Southwest. Each Syms store offers a broad range of first quality, in season merchandise bearing nationally recognized designer or brand-name labels for men, women and children. On June 18, 2009its assets is reasonably determinable. Accordingly, the Company through a wholly-owned subsidiary, acquired certain real property leases, inventory, other property, equipment and otherimplemented the liquidation basis of accounting effective on October 30, 2011. Under this basis of accounting, assets of Filene’s Basement (“Filene’s”), a retail clothing chain, pursuant to an auction conducted in accordance with § 363 of the Federal Bankruptcy Code (see Note 6). As a result, in addition to the 27 Syms stores, since June 19, 2009, the Company has also operated 23 Filene’s Basement stores that are located in the Northeastern, Middle Atlantic, Midwest and Southeast regions. Filene’s Basement also offers a broad range of first quality brand name and designer clothing for men, women and children. The Company operates in a single operating segment – the operation of “off-price” retail stores.

b.

Principles of Consolidation - The financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.

c.

Accounting Period -Fiscal 2009 ended on February 27, 2010; fiscal 2008 ended on February 28, 2009, and fiscal 2007 ended on March 1, 2008. The fiscal years ended February 27, 2010, February 28, 2009 and March 1, 2008 were comprised of 52 weeks.

d.

Occupancy Costs –Occupancy expenses for fiscal 2009, 2008 and 2007 have been reduced by net rental income of $2,373,000, $2,026,000 and $3,006,000, respectively from real estate holdings incidental to the Company’s retail operations.

e.

Cash and Cash Equivalents- Cash and cash equivalents include securities with original maturities of three months or less.

f.

Concentrations of Credit Risk – The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash. The Company has substantially all of its cash in banks. Such cash balances at times exceed federally-insured limits. The Company has not experienced any losses in such accounts.

g.

Receivables – Receivables represent third party credit card receivables.

h.

Merchandise Inventories - Merchandise inventories are stated at the lower of cost (first in, first out) or market, as determined by the moving average cost method for Symstheir net realizable value and by the retail inventory method for Filene’s. Prior to October 4, 2009, all of the Company’s inventories were stated at first in, first out as determined by the retail inventory method. The change in the method of recording Syms inventory in the current fiscal year did not have a material impact on reported results of operations.

i.

Property and Equipment- Property and equipmentliabilities are stated at cost. Depreciationtheir net settlement amount and amortization are principally determined by the straight-line methodestimated costs over the following estimated useful lives:period of liquidation are accrued to the extent reasonably determinable.


 

a.Accrued Liquidation Costs - Under the liquidation basis of accounting, management is required to make significant estimates and judgments regarding the anticipated costs of liquidation. These estimates are subject to change based upon the timing of the Chapter 11 proceedings and changes in market conditions. The Company reviews, on a quarterly basis, the estimated fair value of its assets and all other remaining operating expenses and contractual commitments such as payroll and related expenses, lease termination costs, professional fees, alternative minimum income taxes and other outside services to determine the estimated costs to be incurred during the liquidation period.

 

b.Pension Expense - The Company will terminate its pension plans. Under the liquidation basis of accounting, actuarial valuation analyses are prepared quarterly to determine the fair value, or termination value, of the plan. These valuations and the ultimate liability to settle the plan may result in adjustments driven by changes in assumptions due to market conditions.

Buildings and improvements

15 - 39 years

Machinery and equipment

4 - 7 years

Furniture and fixtures

7-10 years

Leasehold improvements

Lesser of lifeThe Company accrued the termination value of the asset or lifepension plan under the going concern basis of leaseaccounting. The liabilities related to these pension plans will be settled at the same payout percentage as all other unsecured creditor claims.

c.Long-Lived Assets – Owned real estate and other long-lived assets are recorded at net realizable value based on valuations, purchase agreements and/or letters of intent from interested third parties, when available.

Computer software

F-11
SYMS CORP.

3 years

Notes to Consolidated Financial Statements, continued

Going Concern Basis of Accounting

a.Principal Business - Syms Corp. (”Syms” or the “Company”) and its wholly-owned subsidiary Filene’s Basement, LLC (“Filene’s”, “Filene’s, LLC” or “Filene’s Basement”) collectively own and operate a chain of 46 “off-price” retail stores under the “Syms” name (which are owned and operated by the Company) and “Filene’s Basement” name (which are owned and operated by Filene’s, LLC). The stores are located in the United States throughout the Northeastern and Middle Atlantic regions and in the Midwest, Southeast and Southwest.

Each Syms store offers a broad range of first quality, in-season merchandise bearing nationally recognized designer or brand-name labels for men, women and children at prices substantially lower than those generally found in department and specialty stores.

On June 18, 2009, the Company’s, wholly-owned subsidiary, SYL, LLC now known as Filene’s Basement, LLC acquired certain real property leases, inventory, equipment and other assets of Filene’s Basement Inc. (“Filene’s Inc.” or “Filene’s Basement Inc.”), a retail clothing chain, pursuant to an auction conducted in accordance with § 363 of the Bankruptcy Code. As a result, Filene’s, LLC owns and operates 21 Filene’s Basement stores that are located in the Northeastern, Middle Atlantic, Midwest and Southeast regions. Filene’s Basement also offers a broad range of first quality brand name and designer clothing for men, women and children. In addition, Syms owns and operates 5 co-branded Syms/Filene’s Basement stores. Syms and Filene’s, LLC operate in a single operating segment – the “off-price” retail stores segment.

b.Principles of Consolidation - The financial statements include the accounts of the Company including its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.

c.Accounting Period -Fiscal 2011 ended on February 25, 2012; fiscal 2010 ended on February 26, 2011, and fiscal 2009 ended on February 27, 2010. The Company’s fiscal year is a 52-week or 53-week period ending on the Saturday on or nearest to February 28. The fiscal years ended February 25, 2012, February 26, 2011 and February 27, 2010 were comprised of 52 weeks.

d.Reclassifications –Certain reclassifications have been applied to prior year amounts to conform to current year presentation.

e.Cash and Cash Equivalents- Cash and cash equivalents include securities with original maturities of three months or less.

f.Concentrations of Credit Risk – The Company’s financial instruments that are exposed to concentrations of credit risk consisted primarily of cash. The Company had substantially all of its cash in banks. Such cash balances at times exceed federally-insured limits. The Company has not experienced any losses in such accounts.

g.Receivables – Receivables consisted of third party credit and debit card receivables and other miscellaneous items

h.Merchandise Inventories - Merchandise inventories were stated at the lower of cost or market on a first-in, first-out (FIFO) basis, as determined by the retail inventory method. Prior to October 4, 2009, all of the Company’s inventories were determined by the retail inventory method.

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. As part of the integration plan for the Company, the Syms stores converted their merchandise systems over to that used by Filene’s, effective October 3, 2010 and thus reverted back to the retail inventory method. The change in the method of recording Syms inventory in the third quarter of fiscal 2009 and in the third quarter of fiscal 2010 did not have a material impact on reported results of operations.

The Company maintained a reserve for inventory obsolescence, which is a reduction to merchandise inventories. During fiscal 2010 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.

 

F-12
SYMS CORP.

 

Notes to Consolidated Financial Statements, continued

 

i.Property and Equipment- Property and equipment are stated at cost. Depreciation and amortization are determined by the straight-line method over the following estimated useful lives:

 

Buildings and improvements15 - 39 years
Machinery and equipment4 - 7 years
Furniture and fixtures7 - 10 years
Leasehold improvementsLesser of life of the asset or life of lease
Computer software3 years

 

The Company’s policy is to amortize leasehold improvements over the original lease term and not include any renewal terms. The Company’s policy is to capitalize costs incurred during the application-development stage for software acquired and further customized by outside vendors for the Company’s use. Computer software is included in property, plant and equipment on the balance sheet.



 

j.Impairment of Long-Lived Assets – The Company periodically reviews long-lived assets for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable.

 

The Company considers relevant cash flow, management’s strategic plans, significant decreases in the market value of the asset and other available information in assessing whether the carrying value of the assets can be recovered. When such events occur, the Company compares the carrying amount of the assets to the undiscounted expected future cash flows from the use and eventual disposition of the asset. If this comparison indicates an impairment, the carrying amount would then be compared to the estimated fair value of the long-lived asset. An impairment loss would be measured as the amount by which the carrying value of the long-lived asset exceeds its estimated fair value.

j.

Impairment of Long-Lived Assets – The Company periodically reviews long-lived assets for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company considers relevant cash flow, management’s strategic plans, significant decreases in the market value of the asset and other available information in assessing whether the carrying value of the assets can be recovered. When such events occur, the Company compares the carrying amount of the assets to the undiscounted expected future cash flows from the use and eventual disposition of the asset. If this comparison indicates an impairment, the carrying amount would then be compared to the estimated fair value of the long-lived asset. An impairment loss would be measured as the amount by which the carrying value of the long-lived asset exceeds its estimated fair value.

 

k.Deferred Income Taxes - Deferred income taxes reflect the future tax consequences of differences between the tax bases of assets and liabilities and their financial reporting amounts at year end. Based on management's assessment, it is more likely than not that, for federal and state purposes, deferred tax assets will not be realized by future taxable income or tax planning strategies. A net valuation allowance of approximately $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 subsequent period from October 30, 2011 through February 25, 2012.

 

l.Other Assets –The Company has historically recorded the cash surrender value of officers’ life insurance policies on the balance sheet as a non-current asset. In March 2009, as a result of uncertainties surrounding the financial viability of the life insurance company underwriting two of these policies, the Company withdrew $16.0 million of accumulated cash value which was ultimately used in connection with the Company’s acquisition of the assets from Filene’s, Inc. more fully discussed in Note 6 below. The Company continued to be a beneficiary of life insurance policies insuring Mr. Sy Syms, the Company’s founder and Chairman, who died on November 17, 2009. Pursuant to those policies, in December 2009, the Company received cash proceeds of approximately $29.9 million, which was net of the aforementioned, previously received $16.0 million in cash values. Net of the cash surrender value of officer’s life insurance of $5.1 million recorded in other assets, the Company realized a net gain of $24.8 million. Upon receipt, the aforementioned cash proceeds were used for working capital purposes and to repay a portion of the Company’s senior debt facility.

k.

Deferred Income Taxes -Deferred income taxes reflect the future tax consequences of differences between the tax bases of assets and liabilities and their financial reporting amounts at year end.

 

m.Obligation to Customers - Obligations to customers represented credits issued for returned merchandise as well as gift certificates. When the Company sold a gift certificate to a customer, it was recorded as a liability in the period the sale occurred. When the customer redeemed the gift certificate for the purchase of merchandise, a sale was recorded and the liability reduced. The Company’s policy is that these credits and gift certificates do not expire.

 

F-13

l.

Other Assets –The Company has historically recorded the cash surrender value of officers’ life insurance policies on the balance sheet as a non-current asset. Such amounts were $1.9 million and $22.0 million at February 27, 2010 and February 28, 2009, respectively. In March 2009, as a result of uncertainties surrounding the financial viability of the life insurance company underwriting two of these policies, the Company withdrew $16.0 million of accumulated cash value which was ultimately used in connection with the Company’s acquisition of Filene’s, more fully discussed in Note 6 below. The Company continued to be a beneficiary of life insurance policies insuring Mr. Sy Syms, the Company’s founder and Chairman, who died on November 17, 2009. Pursuant to those policies, in December 2009, the Company received cash proceeds of approximately $29.9 million, which was net of the aforementioned, previously received $16.0 million in cash values. Net of the cash surrender value of officer’s life insurance of $5.1 million recorded as of August 29, 2009 in other assets, the Company realized a net gain of $24.8 million. Upon receipt, the aforementioned cash proceeds were used for working capital purposes and to repay a portion of the Company’s senior debt facility.

SYMS CORP.

 

Notes to Consolidated Financial Statements, continued

 

n.Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

m.

Accrued Expenses –Accrued expenses include accrued payroll of $2.7 million and $1.5 million in fiscal 2009 and fiscal 2008, respectively.

 

Significant estimates included inventory provisions, sales returns, self-insurance accruals, deferred tax valuation allowances, any estimated impairment and the useful lives of long-lived assets. Actual results could differ from those estimates.

 

o.Revenue Recognition –The Company recognized revenue at the “point of sale”. Allowance for sales returns is recorded as a component of net sales in the period in which the related sales were recorded.

n.

Obligation to Customers - Obligations to customers represent credits issued for returned merchandise as well as gift certificates. When the Company sells a gift certificate to a customer, it is recorded as a liability in the period the sale occurred. When the customer redeems the gift certificate for the purchase of merchandise, a sale is recorded and the liability reduced. The Company’s policy is that these credits do not expire.

 

p.Comprehensive Income (Loss) – Comprehensive income (loss) was ($76.0) million, ($32.8) million and $8.9 million for the eight months ended October 29, 2011 and fiscal years 2010 and 2009, respectively.

 

q.Segment Reporting - ASC 280, “Segment Reporting” establishes standards for reporting information about a company’s operating segments. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company operated in a single reporting segment - the operation of “off-price” retail stores. Revenues from external customers were derived from merchandise sales.

o.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include inventory provisions, sales returns, self-insurance accruals, deferred tax valuation allowances, any estimated impairment and the useful lives of long-lived assets. Actual results could differ from those estimates.

 

The Company’s merchandise sales mix by product category for the eight months ended October 29, 2011 and fiscal years 2010 and 2009 was as follows:

 

p.

Revenue Recognition –The Company recognizes revenue at the “point of sale”. Allowance for sales returns is recorded as a component of net sales in the period in which the related sales are recorded.

  Eight Months       
  Ended  Fiscal Year  Fiscal Year 
  October 29,  Ended  Ended 
  2011  2010  2009 
          
Women’s dresses, suits, separates and accessories  47%  46%  44%
Men’s tailored clothes and haberdashery  37%  38%  42%
Children’s apparel  5%  5%  5%
Luggage, domestics and fragrances  5%  6%  5%
Shoes  6%  5%  4%
Total  100%  100%  100%

 

q.

Comprehensive Income (Loss) – Comprehensive income (loss) was $8.9 million, ($5.7) million and $0.8 million for fiscal years 2009, 2008 and 2007, respectively.

r.

Segment Reporting - Statement of Financial Accounting Standards (SFAS) No. 131 “Disclosures about Segments of an Enterprise and Related Information” (now ASC 280) establishes standards for reporting information about a company’s operating segments. It also establishes standards for related disclosures about products and services,



geographic areas and major customers. The Company operates in a single reporting segment - the operation of off-price retail stores. Revenues from external customers are derived from merchandise sales. The Company’s merchandise sales mix by product category for the last three fiscal years was as follows:


 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year

 

 

 


 

 

 

2009

 

2008

 

2007

 

 

 


 


 


 

Women’s dresses, suits, separates and accessories

 

 

44

%

 

29

%

 

29

%

Men’s tailored clothes and haberdashery

 

 

42

%

 

53

%

 

53

%

Luggage, domestics and fragrances

 

 

5

%

 

3

%

 

3

%

Children’s wear

 

 

5

%

 

7

%

 

7

%

Shoes

 

 

4

%

 

8

%

 

8

%

 

 



 



 



 

 

 

 

100

%

 

100

%

 

100

%


The Company doesdid not rely on any major customers as a source of revenue.

 

r.Gross Profit - The Company’s gross profit excluded the cost of its distribution network. For the eight months ended October 29, 2011 and the fiscal years ended February 26, 2011 and February 27, 2010, the amounts incurred for our distribution network that were classified in selling, general and administrative expenses and occupancy costs were $9.5 million, $19.0 million and $15.6 million, respectively.

 

s.Computer Software Costs – The Company capitalized the cost of software developed or purchased for internal use.

s.

Gross Profit - The Company’s gross profit may not be comparable to those of other entities, since other entities may include all of the costs related to their distribution network in cost of goods sold and others, like the Company, exclude a portion of those costs from gross profit and instead, include them in other items, such as selling, general and administrative expenses and occupancy costs.

 

t.Advertising Costs – Advertising and sales promotion costs were expensed at the time the advertising occurs. Advertising and sales promotion costs were $2.5 million, $7.0 million and $8.2 million for the eight months ended October 29, 2011 and the fiscal years ended February 26, 2011 and February 27, 2010, respectively. The Company did not receive any allowances or credits from vendors in connection with the purchase or promotion of the vendor’s product, such as cooperative advertising and other considerations.

 

u.Occupancy Costs –Occupancy expenses for the eight months ended October 29, 2011 and the fiscal years ended February 26, 2011 and February 27, 2010 have been reduced by net rental income of $1.4 million, $2.3 million and $2.4 million, respectively, from real estate holdings incidental to the Company’s retail operations.

t.

Computer Software Costs – The Company capitalizes the cost of software developed or purchased for internal use.

 

F-14
SYMS CORP.

 

u.Notes to Consolidated Financial Statements, continued

Advertising Costs – Advertising and sales promotion costs are expensed at the time the advertising occurs. Advertising and sales promotion costs were $8,193,000, $6,339,000 and $8,561,000 in fiscal 2009, 2008 and 2007, respectively. The Company does not receive any allowances or credits from vendors in connection with the purchase or promotion of the vendor’s product, such as co-operative advertising and other considerations.

 

v.Accounting for Stock-Based Compensation– The Company accounts for stock-based compensation costs in accordance with ASC 718, “Stock Compensation”.Consistent with ASC 718, share-based compensation cost is measured at grant date, based on the estimated fair value of the award, and was recognized as expense over the requisite service period.

 

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. Expected volatility is based on the historical volatility of the price of the Company’s stock. The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the option. The Company uses historical data to estimate expected dividend yield, expected life and forfeiture rates. There were no options granted during fiscal 2011, and all options previously issued were fully vested.

v.

Accounting for Stock-Based Compensation– The Company accounts for stock-based compensation costs in accordance with Statement of Financial Accounting Standards No. 123(R), “Share-Based Payments” (“FAS123(R)”) (now ASC 718). Consistent with ASC 718 “Share-Based Payments”, share-based compensation cost is measured at grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period. The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. Expected volatility is based on the historical volatility of the price of the Company’s stock. The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the option. The Company uses historical data to estimate expected dividend yield, expected life and forfeiture rates. There were no options granted during fiscal 2009, and all options previously issued are fully vested.
w.New Accounting PronouncementsIn April 2010, the FASB issued ASU 2010-13, “Compensation – Stock Compensation (Topic 718) – Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades.” ASU 2010-13 provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in ASU 2010-13 are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The adoption of this standard did not have a material impact on the Company’s results of operation or our financial position.

w.

New Accounting Pronouncements– In April 2009, the FASB issued FASB Staff Position No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (now ASC Subtopic 320-10-65), which amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This Staff Position is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The adoption of this Staff Position did not have an effect on our operations.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (now ASC Subtopic 855-10). This standard establishes principles and requirements for subsequent events, which are events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this standard sets forth (a) the period after the balance sheet date during which management of a reporting entity shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (b) the circumstances under which an entity shall recognize events or transactions occurring after the balance sheet date in its financial statements, and (c) the disclosures that an entity shall make about events or transactions that occurred after the balance sheet date. This standard is effective for interim or annual financial periods ending after June 15, 2009 and is to be applied prospectively. The adoption of this standard did not have a material impact on our results of operations or our financial position.



In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets - an amendment of FASB Statement No. 140” (now part of ASC Topic 860, also issued as ASU No. 2009-16). The objective of this standard is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement in transferred financial assets. Additionally, on and after the effective date, the concept of a qualifying special-purpose entity is no longer relevant for accounting purposes. This standard is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. The recognition and measurement provisions of this standard are to be applied to transfers that occur on or after the effective date. The adoption of this standard is not expected to have a material impact on our results of operations or our financial position.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (now part of ASC Subtopic 810, also issued as ASU No. 2009-17). This standard amends FASB Interpretation 46(R) to require an enterprise to perform an analysis to determine whether an enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity by replacing the quantitative-based risks and rewards calculation for determining which enterprise, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and has the obligation to absorb losses of or the right to receive benefits from the entity. This standard also requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. This standard is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. The adoption of this standard is not expected to have a material impact on our results of operations or our financial position.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles - a replacement of FASB Statement No. 162” (now ASC Subtopic 105-10, also issued as ASU No. 2009-01). This standard establishes the ASC as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles. This standard is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of this standard did not have an impact on our results of operations or our financial position.

In August 2009, the FASB issued ASU No. 2009-5, “Fair Value Measurements and Disclosures (Topic 820) - Measuring Liabilities at Fair Value.” ASU No. 2009-5 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using a valuation technique that uses the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities when traded as assets, or another valuation technique that is consistent with the principles of ASC Topic 820. ASU No. 2009-5 is effective for the first reporting period (including interim periods) beginning after issuance. The adoption of ASU No. 2009-5 did not have a material impact on our results of operations or our financial position.

In October 2009, the FASB issued ASU No. 2009-13, “Revenue Recognition (Topic 605) - Multiple Deliverable Revenue Arrangements.” ASU No. 2009-13 eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method and expands the disclosures related to multiple-deliverable revenue arrangements. ASU No. 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with earlier adoption permitted. The adoption of ASU No. 2009-13 will not have a material impact on our results of operations or our financial position.

In January 2010, the FASB issued ASU No. 2010-02, “Consolidation (Topic 810) - Accounting and Reporting for Decreases in Ownership of a Subsidiary - a Scope Clarification.” ASU No. 2010-02 clarifies that the scope of the



decrease in ownership provisions of Topic 810 applies to a subsidiary or group of assets that is a business, a subsidiary that is a business that is transferred to an equity method investee or a joint venture or an exchange of a group of assets that constitutes a business for a noncontrolling interest in an entity and does not apply to sales in substance of real estate. ASU No. 2010-02 is effective as of the beginning of the period in which an entity adopts Topic 810 or, if Topic 810 has been previously adopted, the first interim or annual period ending on or after December 15, 2009, applied retrospectively to the first period that the entity adopted Topic 810. The adoption of ASU No. 2010-02 did not have an impact on our results of operations or our financial position.

In January 2010, the FASB issued ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820) - Improving Disclosures about Fair Value Measurements.” ASU 2010-06 requires new disclosures regarding transfers in and out of the Level 1 and 2 and activity within Level 3 fair value measurements and clarifies existing disclosures of inputs and valuation techniques for Level 2 and 3 fair value measurements. ASU 2010-06 also includes conforming amendments to employers’ disclosures about postretirement benefit plan assets. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosure of activity within Level 3 fair value measurements, which is effective for fiscal years beginning after December 15, 2010, and for interim periods within those years. The adoption of ASU No. 2010-06 will not have a material effect on our results of operations or our financial position.

In February 2010, the FASB issued ASU 2010-09, “Subsequent Events (Topic 855) - Amendments to Certain Recognition and Disclosure Requirements.” ASU 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement that an SEC filer disclose the date through which subsequent events have been evaluated. ASC 2010-09 was effective upon issuance. The adoption of this standard had no effect on our results of operation or our financial position.

NOTE 23 - PROPERTY AND EQUIPMENT

Property and equipment consists of:

 

 

 

 

 

 

 

 

 

 

February 27,
2010

 

February 28,
2009

 

 

 


 


 

 

 

(in thousands)

 

Land

 

$

37,615

 

$

42,125

 

Buildings and building improvements

 

 

109,919

 

 

112,011

 

Leasehold and leasehold improvements

 

 

39,037

 

 

28,531

 

Machinery and equipment

 

 

22,233

 

 

23,212

 

Furniture and fixtures

 

 

28,303

 

 

19,721

 

Construction in progress

 

 

1,685

 

 

1,933

 

Computer software

 

 

16,002

 

 

14,521

 

 

 



 



 

 

 

 

254,794

 

 

242,054

 

Less: accumulated depreciation and amortization

 

 

136,255

 

 

146,098

 

 

 



 



 

 

 

$

118,539

 

$

95,956

 

 

 



 



 

In addition

  February 25, 2012  February 26, 2011 
  (Net Realizable Value)  (Historical Cost) 
  (in thousands) 
Land, buildings and building improvements $139,631  $152,510 
Leasehold and leasehold improvements  -   27,107 
Machinery and equipment  -   18,186 
Furniture and fixtures  -   25,784 
Construction in progress  -   733 
Computer software  -   17,342 
   139,631   241,662 
Less: accumulated depreciation and amortization  -   124,462 
  $139,631  $117,200 

The Company recorded no impairment charges as of October 29, 2011 and $4.3 million in fiscal 2010.

As of October 30, 2011 and thereafter the Company adjusted the carrying value of the real estate assets to reflect the estimated net realizable value of owned property. This value was estimated, with the input of a third party valuation expert, by assessing several possible sales alternatives and weighting the estimated value realized in each of those alternatives according to management’s best estimate of the likelihood of each alternative being achieved. These alternatives included selling the properties reflected in the above amounts,short term as vacant, unleased properties and selling the properties within two to three years after having identified and secured new tenants.

The basis for determining the estimated net realizable values took into consideration many factors which were difficult to predict, including but not limited to local market conditions, vacancy rates, redevelopment opportunities, investor types/profiles, and anticipated timing of sale transactions. Based on management’s weighting of the likelihood of each alternative being achieved an estimated net realizable value of real estate of $139.6 million was recorded. While this amount represented management’s best estimate at the time of finalizing the accompanying statement of net assets, the amount ultimately realized in the sale of the real estate could materially differ from this estimate. However, this estimate should not be construed as a final determination by the Company has four properties, in Ohio, Pennsylvania, Texas and New York that are held for sale. In conjunction with the above,to liquidate all its owned real estate.

F-15
SYMS CORP.

Notes to Consolidated Financial Statements, continued

As of November 15, 2011, the Company recorded impairment chargesentered into an agency agreement with Gordon Brothers whereby the agent agreed to a furniture and fixture guarantee of $2.0 million. This guarantee was for the purchase of all property and equipment, excluding land and buildings and building improvements. The $2.0 million cash was received in fiscal 2009 of $80,000 and in fiscal 2008 of $530,000. The New York property was sold subsequent to year end for an amount greater than the value recorded at February 27, 2010.November 2011.


NOTE 34 - INCOME TAXES

The provision (benefit) for income taxes is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year Ended

 

 

 


 

 

 

February 27,
2010

 

February 28,
2009

 

March 1,
2008

 

 

 


 


 


 

 

 

(in thousands)

 

Current:

 

 

 

 

 

 

 

 

 

 

Federal

 

$

(5,954

)

$

(437

)

$

3,154

 

State

 

 

582

 

 

197

 

 

(328

)

 

 



 



 



 

 

 

 

(5,372

)

 

(240

)

 

2,826

 

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

Deferred:

 

 

 

 

 

 

 

 

 

 

Federal

 

$

(7,321

)

$

(55

)

$

(1,790

)

State

 

 

(1,995

)

 

(313

)

 

1,293

 

 

 



 



 



 

 

 

 

(9,316

)

 

(368

)

 

(497

)

 

 



 



 



 

(Benefit)/provision for income taxes

 

$

(14,688

)

$

(608

)

$

2,329

 

 

 



 



 



 

  Eight Months Ended  Fiscal Year Ended  Fiscal Year Ended 
  October 29, 2011  February 26, 2011  February 27, 2010 
  (in thousands) 
Current:            
Federal $-  $3,368  $(5,954)
State  138   62   582 
   138   3,430   (5,372)
             
Deferred:            
Federal $30,318  $(20,107) $(7,321)
State  15,948   (2,212)  (1,995)
   46,266   (22,319)  (9,316)
             
Provision (benefit) for income taxes $46,404  $(18,889) $(14,688)

The following is a reconciliation of income taxes computed at the U.S. Federal statutory rate to the (recovery)/(benefit) provision for income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year Ended

 

 

 


 

 

 

February 27,
2010

 

February 28,
2009

 

March 1,
2008

 

 

 


 


 


 

 

 

(in thousands)

 

Statutory Federal income tax rate

 

 

35.0

%

 

35.0

%

 

35.0

%

State taxes1

 

 

25.1

 

 

3.8

 

 

13.3

 

Non-deductible insurance premiums

 

 

(10.9

)

 

(18.6

)

 

23.2

 

Non-taxable insurance proceeds

 

 

135.8

 

 

 

 

 

Non-taxable bargain purchase gain

 

 

53.4

 

 

 

 

 

Change of valuation allowance

 

 

(5.4

)

 

 

 

 

Other

 

 

(2.8

)

 

(5.1

)

 

2.8

 

 

 



 



 



 

Effective income tax rate

 

 

230.2

%

 

15.1

%

 

74.3

%

 

 



 



 



 

1

  Eight Months Ended  Fiscal Year Ended  Fiscal Year Ended 
  October 29, 2011  February 26, 2011  February 27, 2010 
          
Statutory Federal income tax rate  35.0%  35.0%  35.0%
State taxes  (0.3)  5.6 (1)  21.3 
Non-deductible insurance premiums  -   -   (10.9)
Life insurance proceeds  -   -   135.8 
Acquisition of Filene’s Basement  -   -   53.4 
Change in valuation allowance  (191.2)  (2.1)  (5.4)
Effect on deferred taxes for change in state tax rate  -   0.6   3.8 
Other  (0.2)  (2.6)  (2.8)
             
Effective income tax rate  (156.7)%  36.5%  230.2%

(1) Includes adjustment in fiscal 2007 of prior year accrual and true-up of state net operating losses.


F-16
SYMS CORP.

Notes to Consolidated Financial Statements, continued

The composition of the Company’s deferred tax assets and liabilities is as follows:

 

 

 

 

 

 

 

 

 

 

Fiscal Year Ended

 

 

 


 

 

 

February 27,
2010

 

February 28,
2009

 

 

 


 


 

 

 

(in thousands)

 

Deferred tax assets:

 

 

 

 

 

 

 

Capitalization of inventory costs

 

$

1,783

 

$

979

 

Pension cost

 

 

28

 

 

16

 

 

 

 

 

 

 

 

 

Reserves not currently deductible for tax purposes

 

 

4,431

 

 

2,450

 

Net operating loss carry forwards

 

 

6,889

 

 

390

 

Depreciation

 

 

12,183

 

 

12,877

 

Step rent

 

 

936

 

 

78

 

Pension Plan Obligation adjustment

 

 

995

 

 

1,464

 

 

 



 



 

Total deferred tax assets

 

$

27,245

 

$

18,254

 

Valuation Allowance

 

 

(346

)

 

 

 

 



 



 

Deferred tax assets after valuation allowance

 

 

26,899

 

 

18,254

 

Deferred tax liabilities:

 

 

 

 

 

 

 

Depreciation

 

 

(2,074

)

 

 

Intangibles

 

 

(778

)

 

 

Other

 

 

(22

)

 

 

 

 



 



 

Total deferred tax liabilities

 

 

(2,874

)

 

 

 

 



 



 

Net deferred tax assets

 

$

24,025

 

$

18,254

 

 

 



 



 

 

 

 

 

 

 

 

 

Current deferred tax assets

 

$

5,912

 

$

3,045

 

Long term deferred tax assets

 

 

18,113

 

 

15,209

 

 

 



 



 

Total deferred tax assets

 

$

24,025

 

$

18,254

 

 

 



 



 

  Fiscal Year Ended 
  February 25, 2012  February 26, 2011 
  (in thousands) 
Deferred tax assets:        
Capitalization of inventory costs $-  $1,917 
Pension cost  5,901   - 
Reserves not currently deductible for tax purposes  1,954   6,651 
Net operating loss carry forwards  51,173   16,610 
Depreciation  12,197   13,282 
Step rent  -   2,557 
Deferred rent  2,238   2,954 
AMT credit  3,182   3,181 
Accrued Expenses  2,331   434 
Other  83   80 
Wind-down expenses  13,227   - 
Air right  3,757   - 
Lease claim  21,875   - 
Store closing cost  2,733   - 
SFAS 158 adjustment  -   918 
Total deferred tax assets $120,651  $48,584 
Valuation allowance  (85,117)  (1,500)
Deferred tax assets after valuation allowance $35,534  $47,084 
         
Deferred tax liabilities:        
Depreciation  -   - 
Intangibles  (364)  (413)
Step rent  -   (299)
Write up of real estates  (35,170)  - 
Pension cost  -   (106)
Other  -   - 
Total deferred tax liabilities  (35,534)  (818)
Net deferred tax assets $-  $46,266 
         
Current deferred tax assets $-  $9,180 
Long term deferred tax assets  -   37,086 
Total deferred tax assets $-  $46,266 

At February 27, 2010,25, 2012, the Company had state net operating loss carry forwards of approximately $37,634,000.$180,723,000. These net operating losses expire in years through fiscal 2029.2031. The Company also had federal net operating loss carry forwards of approximately $13,080,000.$119,515,000. These net operating losses will expire in the year 2029.years through fiscal 2031.

Based on management’s assessment it is more likely than not that, for federal purposes, deferred tax assets will not be realized by future taxable income or tax planning strategies. A valuation allowance of approximately $346,000$85,117,000 was recorded in fiscal 2009 for certain state net operating losses not expected to be fully utilized.all deferred tax assets.

Effective March 4, 2007, the Company adopted FIN 48 (now ASC Subtopic 740-10),Accounting for Uncertainty in Income Taxes, which clarifies the accounting and disclosure for uncertainty in income taxes. As a result of the adoption, the Company recorded as a cumulative effect adjustment, a decrease to retained earnings at the beginning of fiscal 2007 of approximately $250,000 and increased accruals for uncertain tax positions and related interest and penalties by a corresponding amount.

The Company has continued to recognizerecognizes interest and, if applicable, penalties, which could be assessed, related to uncertain tax positions in income tax expense. For fiscal 2009,2011, the Company recorded approximately $14,000$13,000 in interest before federal and state tax effect. The aggregate tax liability as related to uncertain tax positions, plus related interest and penalties, as of February 27, 201025, 2012 is approximately $308,000.$309,000.

Examinations

F-17
SYMS CORP.

Notes to Consolidated Financial Statements, continued

The Company is currently under examination by federal tax authorities havefor fiscal years 2008 and 2009. During the current year, an examination with respect to fiscal years 2005 through 2008 has been completed through fiscal 2006. State examinations occur at various dates covering various periods; one of the larger such examinations,concluded by the State of New Jersey, has concluded its examinationYork that resulted in additional income tax expenses of approximately $138,000. Examination conducted by the State of Florida with respect to fiscal year 2008 and 2009 resulted in no change in tax liability. In addition, recent inquiry by the State of Georgia also resulted in no change through fiscal 2005.the period ended February 2011. There is currently no outstanding state examination.

NOTE 45 - BANK CREDIT FACILITIES

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 facility with Bank of Americaagreement, which replaced the IDB facility, and expireswas 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”). Subsequent to the bankruptcy filing, 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 new Bank of America facility,Credit Agreement, the companyCompany recognized approximately $1.1 million of deferred financing costs, which arewere being amortized over the term of the agreement. This facility calculates availability to borrow utilizing a formula which considers accounts receivable, inventory and certain real estate and bearsThe Credit Agreement bore interest at various rates depending on availability under a formula currentlyset 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%+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 set forth financial conditions which were required in order for a Borrower (i) to (a) acquire a controlling interest in another entity, all or substantially all of the assets of another entity or a business unit of another entity; (b) enter into a merger or consolidation having the same effect; or (c) acquire additional store locations from another entity; (ii) to purchase, redeem or otherwise acquire equity interests issued by it or (iii) to make a voluntary prepayment, repurchase, redemption or defeasance of indebtedness permitted by the Credit Agreement (other than indebtedness subordinated to the indebtedness under the Credit Agreement). These conditions require that:

(i)No default exists under the Credit Agreement;
(ii)After giving effect to the contemplated transaction, Average Daily Availability for each month during the 12 months following such transaction be at least equal to 30% of the Loan Cap; and
(iii)The consolidated fixed charge coverage ratio, after giving pro forma effect to such transaction for the 12 months prior to such transaction be at least 1.2:1.0.

“Average Daily Availability” was computed for each month as follows: (a) for each day during such month the excess of the Loan Cap at the close of business over the outstanding principal amount of the loans and letter of credit obligations at the close of business is determined, (b) the sum of the figures resulting from the computations in clause (a) is determined and (c) such sum is divided by the number of days in such month.

The “Loan Cap” for each day is an amount equal to the lesser of $75 million and the Borrowing Base for such day, plus, in each case, the outstanding principal amount of the term loan for such day. Determination of whether the second or third condition described above was satisfied requires the Company to give effect to the contemplated transaction. Thus, unless and until a specific transaction was proposed, no calculation was required or could be made with respect to these conditions. No transactions giving rise to this calculation occurred during the fiscal year ended February 25, 2012.

In addition, the restriction on indebtedness provided for an availability of up to $5.0 million at any time outstanding for indebtedness incurred to acquire fixed or capital assets, as well as customary carve-outs for existing debt, intercompany debt, guaranties in favor of suppliers and the like. As of the fiscal year ended February 25, 2012, the Borrowers have no such indebtedness outstanding.

F-18
SYMS CORP.

Notes to Consolidated Financial Statements, continued

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 the Bank of America facility at February 27, 2010. less).

As of February 27, 2010, $8.4 million is25, 2012, Syms had no outstanding debt under this facility. Eachfacility, had repaid all its obligations and terminated its Credit Agreement with Bank of the Company’s loan facilities haveAmerica. The Credit Agreement had sub-limits for letters of credit, 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. general liability insurance and $0.2 million is a standby LC for merchandise. At February 26, 2011, the Company had outstanding letters of credit under the facility of $10.1 million.

Total interest charges incurred for


fiscal 2009, fiscal 2008 the eight months ended October 29, 2011 and fiscal 20072010 and 2009 were $1,628,000, $170,000,$1.1 million, $1.5 million and $171,000,$1.6 million, respectively. There was no capitalized interest for fiscal 2009, 2008 or 2007.2011, 2010 and 2009.

NOTE 56 – FAIR VALUE MEASUREMENTS

Effective March 1, 2009, the Company adopted the Financial Accounting Standards Board (“FASB”) Statement No. 157 (now

ASC Subtopic 820-10), Fair Value Measurements (“ASC 820-10”), for financial assets and liabilities. This statement820-10 defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. The statementASC 820-10 indicates, among other things, that a fair value measurement assumes a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The Company adopted the provisions of ASC 820-10 with respectPrior to its non-financial assets and liabilities during the first quarter of fiscal 2009. However, there were noadopting liquidation basis accounting on October 30, 2011, we did not have any non-financial assets or liabilities requiring initial measurement or subsequent re-measurement during fiscal 2009.that are required to be measured at fair value on a recurring basis.

In order to increase consistency and comparability in fair value measurements, ASC 820-10 establishes a hierarchy for observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

·

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

·

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

·

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

F-19
SYMS CORP.

Notes to Consolidated Financial Statements, continued

Assets measured at fair value on a recurring basis include the following as of February 27, 201025, 2012 and February 28, 2009:26, 2011:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at February 27, 2010 Using

 


 

 

 

Quoted
Prices in
Active
Markets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

Total
Carrying
Value at
February 27,
2010

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,049,000

 

$

 

$

 

$

2,049,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash surrender value – Officers’ Life Insurance

 

$

 

$

1,905,000

 

$

 

$

1,905,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at February 28, 2009 Using

 


 

 

 

Quoted
Prices in
Active
Markets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

Total
Carrying
Value at
February 27,
2010

 

 

 


 


 


 


 

 

Cash and cash equivalents

 

$

1,822,000

 

$

 

$

 

$

1,822,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash surrender value – Officers’ Life Insurance

 

$

 

$

22,033,000

 

$

 

$

22,033,000

 


Fair Value Measurement at February 25, 2012 Using
  Quoted  Significant     Total 
  Prices in  Other  Significant  Carrying 
  Active  Observable  Unobservable  Value at 
  Markets  Inputs  Inputs  February 25, 
  (Level 1)  (Level 2)  (Level 3)  2012 
             
Cash and cash equivalents $26,304,000  $-  $-  $26,304,000 
                 
Cash surrender value                
 – Officers’ Life Insurance $-  $1,774,000  $-  $1,774,000 

Fair Value Measurement at February 26, 2011 Using
  Quoted  Significant     Total 
  Prices in  Other  Significant  Carrying 
  Active  Observable  Unobservable  Value at 
  Markets  Inputs  Inputs  February 26, 
  (Level 1)  (Level 2)  (Level 3)  2011 
             
Cash and cash equivalents $2,298,000  $-  $-  $2,298,000 
                 
Cash surrender value                
 – Officers’ Life Insurance $-  $2,192,000  $-  $2,192,000 

On an annual recurring basis, the Company is required to use fair value measures when measuring plan assets of the Company’sCompany's pension plans. As the Company elected to adopt the measurement date provisions of ASC 715, “Employers’"Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans," as of March 4, 2007, the Company was requiredto determine the fair value of the Company’sCompany's pension plan assets as of February 27, 2010.through October 29, 2011, the last day prior to adopting liquidation basis accounting. The fair value of pension plan assets was $7.0$8.1 million at October 29, 2011 andFebruary 27, 2010.25, 2012, respectively. These assets are valued in active liquid markets.

Additionally, on a nonrecurring basis, prior to adopting liquidation basis accounting the Company usesused fair value measures when analyzing asset impairment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that such indicators are present and the review indicates that the assets will not be fully recoverable, based on undiscounted estimated cash flows over the remaining amortization periods, their carrying values are reduced to estimated fair value. During fiscal 2010, the Company wrote down assets with carrying amounts of $10.4 million to a fair value of $6.1 million and recorded an asset impairment charge of $4.3 million. Measurements based on undiscounted cash flows are considered to be level 3 inputs.

Financial Instruments

At February 26, 2011, the fair values of cash and cash equivalents, receivables and accounts payable approximated their carrying values due to the short-term nature of these instruments. The fair value of long term debt approximates carrying value as it is a variable-rate instrument.

F-20
SYMS CORP.

Notes to Consolidated Financial Statements, continued

NOTE 67 – ACQUISITION OF FILENE’S BASEMENT

On June 19,18, 2009 the Company, through its wholly-owned subsidiary, SYL, LLC, acquired certain inventory, fixed assets, equipment, intellectual property and real property leases and certain other net assets of Filene’s Basement, Inc., an off-price retail clothing chain, pursuant to an order of the United States Bankruptcy Court for the District of Delaware in accordance with Sections 105, 363 and 365 of the United States Bankruptcy Code. Assets of Filene’s, wasInc. were acquired for a variety of reasons including the opportunity to capitalize on the strength of brand awareness, leverage the utilization of combined infrastructure and personnel, and to expand market share in the off-price retail clothing market. The purchase price paid at closing was approximately $64.4$64.0 million in cash, of which $38.9 million was paid for by the Company. Approximately $25.0$25.1 million was paid for by Vornado Realty Trust and its joint venture partners to acquire a termination of their lease in Boston, Massachusetts and to make changes to their lease for a Filene’s Basement location in New York, New York. The Company’s portion of the purchase price was paid for through $ 23.9$23.9 million in borrowings under the Company’s asset-based revolving credit facility (Note 4), and the remainder from cash on hand. The acquisition was accounted for as a business combination using the purchase method of accounting under the provisions of SFAS 141(R) (now ASC Topic 805)805, Business Combinations.

The consolidated condensed financial statements presented herein include the results of operations for Filene’s, LLC from the period June 19, 2009, through February 27, 2010.the date of acquisition.

The Company determined that the fair values of assets acquired exceeded the purchase price by approximately $9.7 million, which was recorded as a bargain purchase gain, and is shown as a separate component of operating expenses in the consolidated financial statements for fiscal 2009. Of the $25.1 million paid for by Vornado Realty Trust and its joint venture partners, $8.3 million is considered to be taxable income to the Company. The gain of approximately $13,122,000, before nettingbalance of the related deferred tax liabilities of $3,408,000, was recognized for book purposes only. Thebargain purchase gain is not recognized currently for tax purposes and the bargain purchase resulted in a downward adjustment of the tax basis of the assets acquired. In accordance with Reg. 1.1060-1(c)(2) and 1.338-6(b), the residual method was used to allocate the purchase price among the assets classes. This resulted in reduction of basis for Class VVI assets (fixed assets and prepaid expenses) and elimination of basis for Class VI (Trade name and customer list). The cost of acquisition, in the amount of approximately $4.9$4.7 million, is capitalized for tax and deducted as a current expense for book purposes.

The following table presents (in thousands) the estimated fair values of the net assets acquired and the excess of such net assets over the purchase price at acquisition date:

 

 

 

 

 

Inventory

 

$

21,316

 

Fixed assets and equipment

 

 

30,051

 

Intangible assets

 

 

2,090

 

 

 



 

Fair value

 

 

53,457

 

Purchase Price

 

 

38,927

 

 

 



 

Excess of fair value over purchase price

 

 

14,530

 

Less: Deferred taxes

 

 

(3,408

)

Obligations to customers

 

 

(1,197

)

Other adjustments

 

 

(211

)

 

 



 

Bargain purchase gain

 

$

9,714

 

 

 



 


Inventory $21,316 
Fixed assets and equipment  30,051 
Intangible assets  2,591 
Less:  assumed liability  (1,909)
Fair value  52,049 
Purchase price  38,927 
Excess of fair value over purchase price  13,122 
Less: Current taxes  (3,325)
Deferred taxes  (83)
Bargain purchase gain $9,714 

Intangible assets are comprised primarily of trademarks with a 10 year life, while the customer list acquired having a value of $40,000 has a useful life of 5 years. In conjunction with the transaction, acquisition costs inclusive of investment banking, legal, professional and other costs aggregating $4.9$4.7 million were expensed in the periods incurred.

Included in the accompanying consolidated financial statements are Filene’s net sales of $177.4 million and a net loss of $2.9 million since June 19, 2009 (first date of operating ownership and consolidation) and is included in the consolidated statement of operations. The following table summarizes, on a pro-forma basis, the combined results of operations of the Company and Filene’s as though the acquisition had occurred as of March 2, 2008. The pro-forma amounts give effect

F-21
SYMS CORP.

Notes to adjustments to exclude Filene’s store locations not acquired. The pro-forma amounts presented are not necessarily indicative of either the actual consolidated operating results had the acquisition occurred as of March 2, 2008 or of future consolidated operating results.Consolidated Financial Statements, continued

 

 

 

 

 

 

 

 

 

 

Fiscal Year ended (in thousands)

 

 

 


 

 

 

Feb. 27, 2010

 

Feb. 28, 2009

 

 

 


 


 

Revenues

 

$

441,925

 

$

580,117

 

Net income (1)

 

$

(2,878

)

$

(355

)


(1)

Fiscal 2009 includes a gain of $24,764,000 from the receipt of insurance proceeds from officers’ life insurance policies on the life of the Company’s founder and fiscal 2008 includes a bargain purchase gain of $9,714,000 attributable to the acquisition of Filene’s.

NOTE 78 - PENSION AND PROFIT SHARING PLANS

a.

Pension Plan -The Company has a defined benefit pension plan for all employees other than those covered under collective bargaining agreements through December 31, 2006. This Pension Planpension plan was frozen effective December 31, 2006.

The benefits are based on years of service and the employee’s highest average pay during any five consecutive years within the ten-year period prior to retirement. Pension plan costs are funded annually. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future.

The investment strategy objectives of the plan are continued growth and income. All plan assets are managed by outside investment managers. Asset allocations are reviewed on a regular basis by the investment management company. Fixed income securities make up approximately 46% of plan assets. Equities, primarily S&P 500 securities, make up approximately 43% of plan assets. The remaining 11% of the plan assets are in alternative investments and cash. The measurement date used for fiscal 2011 is February 29, 2012. For fiscal 2010, the measurement date was February 28, 2011.

 

The benefits are based on years of service and the employee’s highest average pay during any five consecutive years within the ten-year period prior to retirement. Pension plan costs are funded annually. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future.

The investment strategy objectives of the plan are continued growth and income. All plan assets are managed by outside investment managers. Asset allocations are reviewed on a regular basis by the investment management company. Equities are primarily S&P 500 securities which make up approximately 51% of plan assets. Fixed income securities make up the remaining approximate 49% and consist primarily of securities in the Barclay’s Capital Aggregate (formerly the Lehman Aggregate) and Merrill Lynch 1-3 year Government Corporate indexes. The measurement date used for fiscal 2009 is February 27, 2010. For fiscal 2008, the measurement date was February 28, 2009. For fiscal 2007and prior, the measurement date used was December 31 immediately prior to each fiscal year end.

Presented below is financial information relating to this plan for the fiscal years indicated:

 

 

 

 

 

 

 

 

 

 

February 27,
2010

 

February 28,
2009

 

 

 


 


 

 

 

(in thousands)

 

CHANGE IN BENEFIT OBLIGATION:

 

 

 

 

 

 

 

Net benefit obligation – beginning of period

 

$

10,034

 

$

9,736

 

Interest cost

 

 

558

 

 

682

 

Actuarial loss

 

 

132

 

 

153

 

Gross benefits paid

 

 

(1,051

)

 

(537

)

 

 



 



 

Net benefit obligation – end of period

 

$

9,673

 

$

10,034

 

 

 



 



 

 

 

 

 

 

 

 

 

CHANGE IN PLAN ASSETS:

 

 

 

 

 

 

 

Fair value of plan assets – beginning of period

 

$

6,338

 

$

9,723

 

Gross benefits paid

 

 

(1,051

)

 

(537

)

Actual (loss)/return on plan assets

 

 

1,746

 

 

(2,848

)

 

 



 



 

Fair value of plan assets – end of period

 

$

7,033

 

$

6,338

 

 

 



 



 

 

Funded status at year end

 

$

(2,640

)

$

(3,696

)

 

 



 



 


  February 25, 2012  February 26, 2011 
  (in thousands) 
CHANGE IN BENEFIT OBLIGATION:        
Net benefit obligation – beginning of period $10,077  $9,673 
Interest cost  600   584 
Actuarial (loss) return  (197)  378 
Gross benefits received (paid)  737   (558)
Net benefit obligation – end of period $11,217  $10,077 
         
CHANGE IN PLAN ASSETS:        
Fair value of plan assets – beginning of period $7,862  $7,033 
Employer contributions  515   397 
Gross benefits paid  (577)  (558)
Actual return on plan assets  294   990 
Fair value of plan assets – end of period $8,094  $7,862 
         
Funded status at year end $(3,123) $(2,215)

Pension expense (benefit) includes the following components:

 

 

 

 

 

 

 

 

 

 

 

 

 

February 27,
2010

 

February 28,
2009

 

March 1,
2008

 

 

 


 


 


 

 

 

(in thousands)

COMPONENTS OF NET PERIODIC (BENEFIT) COST:

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

 

$

 

$

 

Interest cost

 

 

558

 

 

682

 

 

544

 

(Return) loss on assets

 

 

(1,746

)

 

2,848

 

 

(756

)

Amortization of (gain) loss

 

 

1,350

 

 

(3,577

)

 

24

 

 

 



 



 



 

Net periodic (benefit) cost

 

$

162

 

$

(47

)

$

(188

)

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED-AVERAGE ASSUMPTIONS USED:

 

 

 

 

 

 

 

 

 

 

Discount rate

 

 

6.1

%

 

6.3

%

 

5.8

%

Rate of compensation increase

 

 

 

 

 

 

4.5

%

  February 25, 2012  February 26, 2011  February 27, 2010 
  (in thousands) 
COMPONENTS OF NET PERIODIC (BENEFIT) COST:            
Service cost $-  $-  $- 
Interest cost  600   584   558 
Loss on assets  (294)  (990)  (1,746)
Amortization of (gain) loss  (174)  553   1,350 
Net periodic (benefit) cost $132  $147  $162 
             
WEIGHTED-AVERAGE ASSUMPTION USED:            
Discount rate  6.1%  6.1%  6.1%
Rate of compensation increase  -   -   - 

The expected long-term rate of return on plan assets was 8.0% for all years.

F-22
SYMS CORP.

Notes to Consolidated Financial Statements, continued

As of February 27, 201025, 2012 the benefits expected to be paid in the next five fiscal years and in the aggregate for the five fiscal years thereafter are as follows (in thousands):

 

 

 

 

 

2010

 

$

598

 

2011

 

 

602

 

2012

 

 

596

 

2013

 

 

610

 

2014

 

 

635

 

2015-2019

 

$

3,426

 

2012 $607 
2013  615 
2014  635 
2015  642 
2016  682 
2017-2021  3,678 

The fair values and asset allocation of the Company’s plan assets as of February 27, 201025, 2012 and the target allocation for fiscal 2010,2012, by asset category, are presented in the following table.table (in thousands). All fair values are based on quoted prices in active markets for identical assets (Level 1 in the fair value hierarchy).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset Category

 

 

Asset Allocation

 

Fair Value

 

% of Plan
Assets

 

 


 

 


 


 


 

Cash and equivalents

 

 

0% to 5%

 

$

65

 

 

1

%

Equity Securities

 

 

45% to 55%

 

 

3,652

 

 

52

%

Fixed Income Securities

 

 

45% to 55%

 

 

3,316

 

 

47

%

 

 

 

 

 



 



 

Total

 

 

 

 

$

7,033

 

 

100

%

 

 

 

 

 



 



 

     % of Plan 
Asset Category Asset Allocation  Fair Value  Assets 
Cash and equivalents 0% to 10% $295   4%
Equity Securities 30% to 50%  3,456   43%
Fixed Income Securities 35% to 55%  3,762   46%
Alternative Investments 5% to 25%  581   7%
Total   $8,094   100%

The Company adopted SFAS 158 (now(now ASC Topic 715) for fiscal 2006. Under the provisions of ASC 715, the Company is required to recognize in its consolidated balance sheet the unfunded status of a benefit plan. This is measured as the difference between plan assets at fair value and the projected benefit obligation. For the Pension Plan, this is equal to the accumulated benefit obligation.

In addition, ASC 715 requires the Company to recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost. Gains or losses represent changes in the amount of either the projected benefit obligations or plan assets resulting from changes in assumptions, actuarial gains/losses and actual investment returns. ASC 715 did not change the recognition of pension income or expense in the statement of operations. Since the Company has recognized the funded status of its defined benefit pension plans since its adoption of the Accelerated Method, the adoption of ASC 715 did not have a material effect on the Company’s reported pension liability or pension expense in any period presented. Effective with fiscal 2008, the measurement date for the plan coincides with the fiscal year end date.



b.

Profit-Sharing and 401(k) Plan- The Company has a profit-sharing plan and 401(k) plan for all employees other than those covered under collective bargaining agreements. In 1995, the Company established a defined contribution savings plan 401(k) for substantially all of its eligible employees. Employees may contribute a percentage of their salary to the plan subject to statutory limits. The Company made contributions to this plan of $450,000 in fiscal 2007. No contributions were made to this plan in fiscal 20082011, fiscal 2010 and fiscal 2009.

NOTE 9 – COMMITMENTS

 

NOTE 8 - COMMITMENTS

a)

a.

Leases- The Company no longer has various operating leases for its retail stores, with terms expiring between 2010 and 2031. Under moststores. Previous operating lease agreements, the Company pays real estate taxes, maintenance and other operating expenses. Certain store leases also provide for additional contingent rentals based upon a percentage of sales in excess of certain minimum amounts. Future minimum lease paymentsliability claims under operating leases as of February 27, 2010 for each502(b)(6) of the next five yearsU.S. Bankruptcy Code total approximately $56.5 million and are reported in total current liabilities on the aggregate are as follows (in thousands):

consolidated statement of net assets.

 

 

 

 

 

Fiscal 2010

 

$

35,526

 

Fiscal 2011

 

 

33,902

 

Fiscal 2012

 

 

31,383

 

Fiscal 2013

 

 

30,704

 

Fiscal 2014

 

 

30,128

 

Thereafter

 

 

156,418

 

 

 



 

Total

 

$

318,061

 

 

 



 

F-23
SYMS CORP.

Notes to Consolidated Financial Statements, continued

Rent expense for operating leases (in thousands) is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year Ended

 

 


 

 

February 27,
2010

 

February 28,
2009

 

March 1,
2008

 

 

 


 


 


 

Minimum rentals due

 

$

27,060

 

$

6,581

 

$

6,683

 

Escalation rentals accrued

 

 

2,167

 

 

(338

)

 

(369

)

Sublease rentals

 

 

(1,319

)

 

(250

)

 

(250

)

 

 



 



 



 

Total

 

$

27,908

 

$

5,993

 

$

6,064

 

 

 



 



 



 


  Eight Months Ended  Fiscal Year Ended  Fiscal Year Ended 
  October 29, 2011  February 26, 2011  February 27, 2010 
Minimum rentals due $23,416  $35,684  $27,060 
Escalation rentals accrued  3,058   3,516   2,167 
Sublease rentals  (812)  (1,257)  (1,319)
Total $25,662  $37,943  $27,908 

b.

b)

Legal Proceedings -The Company is a party to routine litigation incidental to its 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.

In December 2007, the Company announced its decision to voluntarily delist its common stock from trading on the New York Stock Exchange (“NYSE”) and, given that there were fewer than 300 holders of record of its common

shares, simultaneously deregister its common stock under federal securities laws. The Company’s decision to deregister with the Securities and Exchange Commission (“SEC”) and delist from NYSE was principally motivated by the desire to minimize the financial and administrative burdens associated with being an SEC reporting company and further minimize or eliminate the compliance obligations incident to the Sarbanes-Oxley Act of 2002. In January 2008 certain institutional investors commenced a campaign to cause certain shareholders to register shares individually and simultaneously brought two actions seeking injunctive relief from the aforementioned deregistration and delisting, counsel fees and unspecified damages. Although the Company believes that its actions were appropriate, the Company determined that the costs and expenses associated with protracted litigation could not be justified and, in February 2008, reregistered its common stock and listed its shares for trading on NASDAQ. The costs associated with this litigation were substantially covered by insurance. All litigation associated with these matters has either been dismissed in the Company’s favor or settled within the limits of the Company’s insurance policies, less a nominal deductible.


NOTE 910 - PREFERRED STOCK

The Company is authorized to issue up to 1,000,000 shares of preferred stock, in one or more series of preferred stock. The Board of Directors is authorized to establish the number of shares to be included in each such series, and to fix the designation, relative rights, preferences, qualifications and limitations of the shares of each such series. No such shares have been issued or are outstanding.

NOTE 1011 - STOCK OPTION PLAN

The Company’s Amended and Restated Incentive Stock Option and Appreciation Plan allows for the granting of incentive stock options, as defined in Section 422A of the Internal Revenue Code of 1986 (as amended), non-qualified stock options and stock appreciation rights. The plan requires that incentive stock options be granted at an exercise price not less than the fair market value of the Common Stock on the date the option is granted. The exercise price of the option for holders of more than 10% of the voting rights of the Company must be not less than 110% of the fair market value of the Common Stock on the date of grant. Non-qualified options and stock appreciation rights may be granted at any exercise price.price, subject to applicable laws. The Company has reserved 1,500,000 shares of common stock for issuance thereunder.such issuances. The Company is no longer issuinggranting options under its Amended and Restated Incentive Stock Option and Appreciation Plan.

No option or stock appreciation rights may be granted under the Amended and Restated Incentive Stock Option Plan after July 28, 2013. The maximum exercise period for any option or stock appreciation right under the plan is ten years from the date the option is granted (five years for any optionee who holds more than 10% of the voting rights of the Company).

On July 14, 2005, at the annual meeting of shareholders of the Company, the shareholders of the Company approved the 2005 Stock Option Plan (the “2005 Plan”"2005 Plan"), which 2005 Plan was adopted by the Board of Directors of the Company on April 7, 2005 subject to shareholder approval. The 2005 Plan permits the grant of options, share appreciation rights, restricted shares, restricted share units, performance units, performance shares, cash-based awards and other share-based awards. Key employees, non-employee directors, and third party service providers of the Company who are selected by a committee designated by the Board of Directors of the Company are eligible to participate in the 2005 Plan. The maximum number of shares of Common Stock issuable under the Plan is 850,000, subject to certain adjustments in the event of changes to the Company’s capital structure.

The 2005 Plan requires that incentive stock options be granted at an exercise price not less than the fair market value of the Common Stock on the date the option is granted. The exercise price of such options for holders of more than 10% of the voting stock of the Company must be not less than 110% of the fair market value of the Common Stock on the date of grant. The exercise price of non-qualified options and stock appreciation rights must not be less than fair market value on the date such benefits are granted.

The maximum exercise period for any option or stock appreciation right under the 2005 Plan is ten years from the date the option is granted (five years for any incentive stock options issued to a person who holds more than 10% of the voting stock of the Company).

F-24
SYMS CORP.

Notes to Consolidated Financial Statements, continued

The 2005 Plan permits the Company to issue restricted shares, restricted share units, performance units, cash-based awards and other share-based awards with such terms and conditions (including applicable vesting conditions) as the Company shall determine, subject to certain terms and conditions set forth in the 2005 Plan.

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. Expected volatility is based on the historical volatility of the price of the Company’s stock. The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the option. The Company uses historical data to estimate expected dividend yield, expected life and forfeiture rates. The aggregate intrinsic value of the outstanding and exercisable options during both fiscal 20092011 and fiscal 20082010 was approximately $0 and $932,000, respectively.$0. The aggregate intrinsic values of options exercised during fiscal 20092011 and fiscal 20082010 were approximately $17,000 and $706,000, respectively.$0.


The following table summarizes stock option activity for each of the past three fiscal years:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year Ended

 

 


 

 

(in thousands except per share amounts)

 

 

February 27, 2010

 

February 28, 2009

 

March 1, 2008

 

 

 


 


 


 

 

 

Fiscal
2005
Shares

 

Weighted
Average
Exercise
Price

 

Fiscal
2005
Shares

 

Weighted
Average
Exercise
Price

 

Fiscal
2005
Shares

 

Weighted
Average
Exercise
Price

 

 

 


 


 


 


 


 


 

FIXED OPTIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding – beginning of year

 

 

111

 

$

13.81

 

 

329

 

$

11.19

 

 

330

 

$

11.17

 

Exercised

 

 

(9

)

 

7.18

 

 

(218

)

 

9.81

 

 

(0.8

)

 

13.74

 

Cancelled

 

 

(4

)

 

5.21

 

 

 

 

 

 

(0.5

)

 

5.21

 

 

 



 



 



 



 



 



 

Outstanding – end of year

 

 

98

 

$

15.01

 

 

111

 

$

13.81

 

 

329

 

$

11.19

 

 

 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options exercisable at year end

 

 

98

 

$

15.01

 

 

111

 

$

13.81

 

 

329

 

$

11.19

 

 

 



 



 



 



 



 



 

  Fiscal Year Ended 
  (in thousands except per share amounts) 
  February 25, 2012  February 26, 2011  February 27, 2010 
  Options  

Weighted

Average

Exercise

Price Per

Share

  Options  

Weighted

Average

Exercise

Price Per

Share

  Options  

Weighted

Average

Exercise

Price Per

Share

 
                   
Outstanding – beginning of year  98  $15.01   98  $15.01   111  $13.81 
Exercised  -   -   -   -   (9)  7.18 
Cancelled  -   -   -   -   (4)  5.21 
Outstanding – end of year  98  $15.01   98  $15.01   98  $15.01 
                         
Options exercisable at year end  98  $15.01   98  $15.01   98  $15.01 

During 2009,fiscal 2011, no stock options for 8,822 shares were exercised and 4,790 shares wereor cancelled by the Company. The remaining outstanding options expire in 2015.

NOTE 1112 -NET (LOSS) INCOME (LOSS) PER SHARE

In accordance with SFAS 128 (now ASC Topic 260)260 “Earnings Per Share”, basic net (loss) income (loss) per share has been computed based upon the weighted average common shares outstanding. Diluted net (loss) income (loss) per share gives effect to outstanding stock options, if they are dilutive.

Net (loss) income (loss) per share has been computed as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal 2009

 

Fiscal 2008

 

Fiscal 2007

 

 

 


 


 


 

 

 

(in thousands except per share amounts)

 

Basic and diluted net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

8,308

 

$

(3,423

)

$

807

 

Average shares outstanding - basic

 

 

14,593

 

 

14,589

 

 

14,659

 

 

Net income (loss) per share – basic

 

$

0.57

 

$

(0.23

)

$

0.06

 

 

Average shares outstanding – diluted

 

 

14,593

*

 

14,589

*

 

14,760

 

 

Net income (loss) per share – diluted

 

$

0.57

 

$

(0.23

)

$

0.05

 

*

  Eight Months
Ended
       
  October 29, 2011  Fiscal 2010  Fiscal 2009 
  (in thousands except per share amounts) 
    
Basic and diluted net (loss) income per share:            
Net (loss) income $(76,027) $(32,857) $8,308 
Average shares outstanding – basic and diluted (1)  14,448   14,456   14,593 
Net (loss) income per share – basic and diluted $(5.26) $(2.27) $0.57 

(1) All outstanding options were anti-dilutive for the eight months ended October 29, 2011, fiscal 20092010 and fiscal 20082009.


F-25
SYMS CORP.

Notes to Consolidated Financial Statements, continued

NOTE 1213 - UNAUDITED SELECTED QUARTERLY FINANCIAL DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter

 

 

First

 

Second

 

Third

 

Fourth

 

 

 


 


 


 


 

 

 

(In thousands, except per share amounts)

YEAR ENDED FEBRUARY 27, 2010 (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

50,256

 

$

76,437

 

$

135,159

 

$

115,457

 

Gross profit

 

 

21,061

 

 

28,173

 

 

57,868

 

 

38,000

 

Net income (loss) (2) (3)

 

$

(2,035

)

$

(7,889

)

$

25,646

 

$

(7,414

)

Net income (loss) per share – basic

 

$

(0.14

)

$

(0.54

)

$

1.76

 

$

(0.51

)

Net income (loss) per share – diluted

 

$

(0.14

)

$

(0.54

)

$

1.76

 

$

(0.51

)


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter

 

 

First

 

Second

 

Third

 

Fourth

 

 

 


 


 


 


 

 

 

(In thousands, except per share amounts)

YEAR ENDED FEBRUARY 28, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

64,588

 

$

59,030

 

$

64,330

 

$

54,052

 

Gross profit

 

 

28,178

 

 

23,140

 

 

26,632

 

 

22,575

 

Net income (loss) (2) (4) (5)

 

$

626

 

$

(1,271

)

$

(891

)

$

(1,887

)

Net income (loss) per share – basic

 

$

0.04

 

$

(0.09

)

$

(0.06

)

$

(0.12

)

Net income (loss) per share – diluted

 

$

0.04

 

$

(0.09

)

$

(0.06

)

$

(0.12

)


  Quarter 
  First  Second  Third  Fourth(1) 
  (In thousands, except per share amounts) 
EIGHT MONTH ENDED OCTOBER 29, 2011                
Net sales $105,355  $86,319  $66,540   N/A 
Gross profit $44,642  $31,800  $23,743   N/A 
Net income (loss)(2) $1,474  $(11,546) $(65,955)  N/A 
Net income (loss) per share – basic and diluted $0.10  $(0.80) $(4.57)  N/A 

  Quarter 
  First  Second  Third  Fourth 
  (In thousands, except per share amounts) 
YEAR ENDED FEBRUARY 26, 2011                
Net sales $121,445  $102,073  $120,739  $100,876 
Gross profit $53,743  $37,123  $51,345  $31,581 
Net loss(3)(4) (5) $(809) $(10,930) $(3,315) $(17,803)
Net loss per share – basic and diluted $(0.06) $(0.76) $(0.23) $(1.23)

(1)
Adoption of liquidation basis therefore not applicable (“N/A”).

(1)

Results for fiscal 2009 are materially impacted by the acquisition(2)

Includes write off of Filene’s Basementdeferred tax assets of $46,266 in the secondthird quarter. (See Note 6).

(2)

(3)

Includes impairment chargesloss on disposition of $80 and $530 in the fourth quarterassets of Fiscal 2009 and Fiscal 2008 respectively, relating to certain leased properties or properties held for sale.

(3)

Includes income of $24.8 million from the receipt of life insurance proceeds from officers’ life insurance policies$504 in the third quarter of 2010.

(4)Includes asset impairment charge of $1,721 and a bargain purchase gain of $9.7 million attributable to the acquisition of Filene’s$2,534 in the second quarter.

third and fourth quarters, respectively.

(4)

(5)

Includes adjustment for $209,000restructuring charges of $831, $471, $831 and $7,173 in the first, second, third and fourth quarter reflecting accelerated depreciation for the anticipated closing of one store and the related tax effect of $109,000.

(5)

Includes a $290,000 fourth quarter adjustment to the income tax payable account related to prior year taxes.

quarters, respectively.

F-20


PART III

NOTE 14 – RELATED PARTY TRANSACTIONS

On March 9, 2010, the Company purchased 150,196 shares of the Company’s Common Stock from the Sy Syms Revocable Living Trust at a price of $8.04 per share. The purchase was approved by a committee of the Board consisting solely of the independent members of the Board. The price approved by the committee, after consultation with a financial consultant and counsel, represented a 5% discount to a thirty-day volume weighted average price.

As of April 2012, the Company is resolved to file a motion with the Bankruptcy Court that would require Marcy Syms to repay the Company $1.6 million for all post Sarbanes-Oxley premiums paid by the Company on her behalf as well as $0.2 million for the net present value of Pre Sarbanes-Oxley premiums, for a total of $1.8 million. The value of these premiums continues to be recorded as an asset and is included in prepaid expenses and other current assets on the statement of net assets.

NOTE 15 – RESTRUCTURING CHARGES

Since the acquisition of the assets from Filene’s, Inc. in June 2009, the Company had continued to assess the most effective manner in which to integrate the operations of Filene’s, LLC and Syms to maximize the synergies of the two businesses. This plan included the integration of the two IT systems into one common platform, the consolidation of distribution center functions, the co-branding of several stores, the closing of Filene’s Massachusetts office and related reductions in staffing levels. In addition, the Company closed four under-performing stores in 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 (net of estimated sub-lease income) as a restructuring charge totaling $7.2 million in 2010.

F-26
SYMS CORP.

Notes to Consolidated Financial Statements, continued

The consolidation of distribution center functions involved a shift of most merchandise processing 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 and continued to house the adjoining retail store and corporate offices. Severance costs associated with staffing level reductions for approximately 200 employees, including store, distribution center and corporate support staff, totaled $1.1 million. In addition, $0.8 million in professional fees related to the integration of the two IT systems and $0.3 million of legal costs were incurred and have been recorded as restructuring charges.

Due to the Chapter 11 Bankruptcy filing, any remaining lease obligations were written off in November 2011 and any future amounts due to the Landlord were recorded in total current liabilities (See Note 9).

The details of the restructuring accruals are as follows (in thousands):

  

Lease

obligations

  

One-time

termination benefits

  

Other

associated costs

  Total 
             
Balance, February 28, 2010 $-  $-  $-  $- 
Additions  7,171   1,082   1,053   9,306 
Payments and other adjustments  37   (976)  (1,053)  1,992 
Balance, February 26, 2011 $7,208  $106  $-  $7,314 
                 
Payments and other adjustments  (1,654)  (106)  -   (1,760)
Write off due to Bankruptcy  (5,554)  -   -   (5,554)
Balance, February 25, 2012 $-  $-  $-  $- 

The net accrual of $7,314 at February 26, 2011 is reported as $2,322 in accrued expenses and $4,992 in other long-term liabilities.

F-27