SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark one)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 FOR THE FISCAL YEAR ENDED MARCH 1, 2003
or
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-8546
SYMS CORP
(Exact name of registrant as specified in its charter)
NEW JERSEY NO. 22-2465228
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
SYMS WAY, SECAUCUS, NEW JERSEY 07094
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (201) 902-9600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange on
Title of Each class Which Registered
------------------- ------------------------
Common Stock, $0.05 Par Value Per Share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: None
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12-b2 of the Exchange Act).
Yes ___ No _X_
The aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant was approximately $55,515,000 based upon the
closing market price of $7.40 per share of the Common Stock on the New York
Stock Exchange as of August 30, 2002, the last business day of the registrant's
most recently completed second fiscal quarter.
As of May 5, 2003, 15,440,478 shares of Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's Proxy Statement for the 2003 Annual Meeting of
Stockholders to be filed pursuant to Regulation 14A are incorporated in Part III
hereof by reference.
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PART I
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ITEM 1. BUSINESS
GENERAL
Syms Corp operates a chain of 40 "off-price" retail stores located
throughout the Northeastern and Middle Atlantic regions and in the Midwest,
Southeast and Southwest. Each Syms store offers a broad range of first quality,
in-season merchandise bearing nationally recognized designer or brand-name
labels at prices substantially lower than those generally found in department
and specialty stores. Syms directs its merchandising efforts at predominantly
middle-income, fashion-minded and price conscious customers.
Since the first Syms store opened in New York City in 1959, the Company has
expanded to 40 stores and the aggregate amount of selling space in Syms stores
increased from approximately 2,000 square feet to approximately 1,606,000 square
feet. The Company maintains a 277,000 square foot distribution center and
executive headquarters in Secaucus, New Jersey.
The Company maintains its executive offices at Syms Way, Secaucus, New
Jersey 07094, telephone (201) 902-9600. Unless otherwise noted, references to
the "Company" or to "Syms" relate to Syms Corp, its subsidiaries and their
predecessors.
DESCRIPTION OF BUSINESS
The Syms chain of 40 apparel stores offers a broad range of "off-price"
first quality, in-season merchandise consisting primarily of men's tailored
clothing and haberdashery, women's dresses, suits and separates, children's
apparel and men's, women's and children's shoes. Syms stores emphasize better
quality, nationally recognized designer and brand name merchandise at prices
substantially below those generally charged by department and specialty stores.
Syms carries a wide selection of sizes and styles of men's, women's and
children's wear.
Syms operates in a single industry segment and has no foreign operations.
No material part of the Company's consolidated revenues is received from a
single customer or group of customers.
MERCHANDISE
For the year ended March 1, 2003, net sales were generated by the following
categories:
Men's tailored clothes and haberdashery .............. 52%
Women's dresses, suits, separates and accessories .... 30%
Shoes ................................................ 7%
Children's wear ...................................... 8%
Luggage, domestics and fragrances .................... 3%
----
100%
Most of the items sold by the Company consist of nationally recognized
fashion brand-name merchandise. Merchandise is displayed by type and size on
conveniently arranged racks or counters. No emphasis is placed on any particular
"label". The stores generally offer minor alterations for an additional charge.
PURCHASING
The Company purchases first-quality, in-season, brand-name merchandise
directly from manufacturers on terms more favorable than those generally
obtained by department and specialty stores. Syms estimates that approximately
200 brand-name manufacturers of apparel are represented in its stores. The
Company does not maintain large out-of-season inventories. However, Syms
occasionally buys certain basic clothing which does not change in style from
year to year at attractive prices for storage until the following season.
Purchasing is performed by a buying staff in conjunction with the General
Merchandise Manager and several other key divisional merchandise managers.
DISTRIBUTION
The Company owns a distribution center, located at Syms Way, Secaucus, New
Jersey. The facility contains approximately 277,000 square feet of warehouse and
distribution space, 34,000 square feet of office space and 29,000 square feet of
store space. The facility is located on an 18.6 acre parcel of land for which
the Company holds a ground lease for a remaining term of 273 years. Most
merchandise is received from manufacturers at the distribution center where it
is inspected, ticketed and allocated to particular stores.
1
MARKETING
The Company's pricing policy is to affix a ticket to each item displaying
Syms' selling price as well as the price the Company regards as the traditional
full retail price of that item at department or specialty stores. All garments
are sold with the brand-name as affixed by the manufacturer. Because women's
dresses are vulnerable to considerable style fluctuation, Syms has long utilized
a ten-day automatic markdown pricing policy to promote movement of merchandise.
The date of placement on the selling floor of each women's dress is stamped on
the back of the price ticket. The front of each ticket contains what the Company
believes to be the nationally advertised price, the initial Syms price and three
reduced prices. Each reduced price becomes effective after the passage of ten
selling days. Women's dresses represent approximately 4.5 % of net sales. The
Company also offers "dividend" prices consisting of additional price reductions
on various types of merchandise.
Syms has as its tag line "An Educated Consumer is Our Best Customer"(R),
one of the best known in retail advertising. The Company advertises principally
on television, radio and, more recently, has enhanced its advertising by
including print media as well as direct mail.
The Company sells its merchandise for cash, checks, national credit cards,
and its own Syms credit card. Syms sells its own credit card receivables on a
non-recourse basis to a third party for a fee. Merchandise purchased from the
Company may be returned within a reasonable amount of time, within season. The
Company does not offer cash refunds for purchases, but issues credits toward the
Syms charge card and other major credit cards or store merchandise credits which
may be used toward the purchase of other merchandise.
TRADEMARKS
"Syms", "An Educated Consumer is Our Best Customer "(R), "Names You Must
Know"(R), and "The More You Know About Clothing, the Better it is for Syms"(R)
have been registered with the United States Patent and Trademark Office.
COMPETITION
The retail apparel business is highly competitive, and the Company accounts
for only a small fraction of the total market for men's, women's and children's
apparel. The Company's stores compete with discount stores, apparel specialty
stores, department stores, manufacturer-owned factory outlet stores and others.
Many of the stores with which the Company competes are units of large national
or regional chains that have substantially greater resources than the Company.
Retailers having substantially greater resources than the Company have indicated
their intention to enter the "off-price" apparel business, and the "off-price"
apparel business itself has become increasingly competitive, especially with
respect to the increased use by manufacturers of their own factory outlets. At
various times of the year, department store chains and specialty shops offer
brand-name merchandise at substantial markdowns.
OPERATIONS AND CONTROL SYSTEMS
The Company has implemented a merchandise control system which tracks a
product from its purchase to its ultimate sale in the Company's stores. The
system tracks the product by store in approximately 750 categories. All the
information regarding the product is transmitted daily through telephone lines
to the Company's database at its executive headquarters. Each week the Company's
executives receive detail reports regarding sales and inventory levels in units
and retail dollars on a store-by-store basis.
Management of the Company visit stores on a regular basis to coordinate
with the store managers, among other things, in the training of employees in
loss prevention methods. Each store has on premises security personnel during
normal hours and a security system after hours.
EMPLOYEES
At March 1, 2003, the Company had 2,081 employees of whom approximately 743
work on a part time basis. Approximately 30 to 100 persons, consisting mostly of
sales personnel, are employed at each Syms store. The Company has a collective
bargaining agreement with Local 108 of the Retail, Wholesale and Department
Store Union which expires on May 31, 2003 and covers 145 sales and tailor
employees. The Company's collective bargaining agreements Local 1102 of the
Retail, Wholesale and Department Store Union and the United Food and Commercial
Workers Union expired on March 28, 2003 and April 30, 2003, respectively, which
together cover 1,327 sales and tailor employees. The Company is currently in
negotiations with the unions to enter into new collective bargaining agreements.
The Company believes its relationships with the unions are good.
2
ITEM 2. PROPERTIES
THE STORES
LOCATION
At March 1, 2003, the Company had 40 stores, 17 of which are located in
leased facilities. The following table indicates the locations of the stores and
the approximate selling space of each location. In addition to the selling space
indicated, each store contains between approximately 2,000 to 12,000 square feet
for inspection and ticketing of merchandise and administrative functions.
LEASED/ SELLING LEASED/ SELLING
STATE LOCATION OWNED SPACE STATE LOCATION OWNED SPACE
----- -------- ----- ----- ----- -------- ----- -----
CONNECTICUT NEW YORK/NEW JERSEY
Fairfield Owned 32,000 Park Avenue Leased 45,000
Hartford Leased 31,000 Trinity Owned 40,000
Westbury Owned 72,000
Commack Owned 36,000
FLORIDA Westchester Leased 50,000
Fort Lauderdale Owned 44,000 Rochester Owned 32,000
Miami Owned 45,000 Buffalo Owned 39,000
West Palm Beach Owned 36,000 Paramus Owned 56,000
Tampa Owned 38,000 Woodbridge Leased 32,000
Kendall Leased 32,000 Secaucus Owned 29,000
GEORGIA Cherry Hill Owned 40,000
Norcross Owned 51,000 Lawrenceville Leased 54,000
Marietta Owned 39,000 NORTH CAROLINA
ILLINOIS Charlotte Leased 30,000
Addison Owned 47,000
Niles Leased 32,000 OHIO
Highland Heights Leased 36,000
MARYLAND
Baltimore Leased 43,000 PENNSYLVANIA
Rockville Owned 61,000 King of Prussia Owned 41,000
Towson Leased 41,000 Monroeville Owned 31,000
MASSACHUSETTS
Norwood Leased 36,000
Peabody Leased 39,000
RHODE ISLAND
N. Cranston Leased 27,000
MICHIGAN
Southfield Owned 46,000 TEXAS
Troy Leased 37,000 Dallas Owned 42,000
MISSOURI Houston Owned 34,000
St. Louis Leased 33,000 Hurst Owned 38,000
VIRGINIA
Falls Church Leased 39,000
3
Syms stores are either "free standing" or located in shopping centers or
indoor malls, and all are surrounded by adequate parking areas, except for the
two New York City stores. Syms stores are usually located near a major highway
or thoroughfare in suburban areas populated by at least 1,000,000 people and are
readily accessible to customers by automobile. In certain areas where the
population is in excess of 2,000,000 people, Syms has opened more than one store
in the same general vicinity.
Syms also owns land in Roseland, New Jersey in a commercially zoned area
which the Company agreed to sell on March 31, 2003. The closing of the sale is
subject to certain conditions, including conditions relating to environmental
standards. Syms also owns land and buildings in Northern Ohio at the site of a
closed store.
LEASE TERMS
Seventeen of the Company's 40 stores are currently leased from unrelated
parties, and the Elmsford, New York store is leased from Sy Syms, the Chairman
of Syms Corp. The following table summarizes lease expirations and any renewal
options:
NUMBER OF NUMBER OF
CALENDAR LEASES LEASES WITH RANGE IN YEARS OF
PERIODS EXPIRING RENEWAL OPTIONS OPTION PERIODS (1)
------- --------- --------------- ------------------
2003 0 0 0
2004 2 1 5 years
2005 4 3 1 - 10 years
2006 1 1 0
2007 1 0 0
2008 and thereafter 9 8 2.5 - 5 years
(1) Depending on the applicable option, the minimum rent due during
the renewal option periods may be based upon a formula contained
in the existing lease or negotiations between the parties.
Store leases provide for a base rental of between approximately $4.30 and
$40.79 per square foot. In addition, under the "net" terms of all of the leases,
the Company must also pay maintenance expenses, real estate taxes and other
charges. One of the Company's stores provides for rent based on a percentage of
sales. Minimum rental payments for Syms' leased stores aggregated $8,655,842 for
the year ended March 1, 2003, of which $649,125 was paid to Sy Syms as fixed
rent. On December 1, 2002, Syms Corp and Sy Syms signed a lease for the Elmsford
store for an annual rent of $796,500 which expires on November 30, 2010.
In addition, the Company has a lease for its Chicago store, which closed on
September 14, 2002, expiring in 2011.
STORE OPENINGS/CLOSINGS
No new stores were opened this year. Two stores were closed this fiscal
year. These stores were located in Pittsburgh, PA and Chicago, IL.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine litigation incident to its business.
Management of the Company believes, based upon its assessment of the actions and
claims outstanding against the Company, and after discussion with counsel, that
there are no legal proceedings that will have a material adverse effect on the
financial condition or results of operations of the Company. Some of the
lawsuits to which the Company is a party are covered by insurance and are being
defended by the Company's insurance carriers.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this Annual Report.
4
PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The common stock of the Company (the "Common Stock") is listed for trading
on the NewYork Stock Exchange under the symbol "SYM". The following table sets
forth the high and low sales prices for the Company's Common Stock as reported
by the New York Stock Exchange for each quarter within the two most recent
fiscal years of the Company.
HIGH LOW
----- -----
Quarter ended March 1, 2003 $7.71 $7.07
Quarter ended November 30, 2002 7.79 6.45
Quarter ended August 31, 2002 7.50 5.85
Quarter ended June 1, 2002 6.15 5.45
Quarter ended March 2, 2002 $6.40 $5.00
Quarter ended December 1, 2001 5.80 4.85
Quarter ended September 1, 2001 6.95 5.43
Quarter ended June 2, 2001 8.00 5.72
HOLDERS
As of May 5, 2003, there were 123 record holders of the Company's Common
Stock. The Company believes that there were in excess of 1,416 beneficial owners
of the Company's Common Stock as of that date.
DIVIDENDS
The Board of Directors of the Company did not declare dividends in the
fiscal years ended March 1, 2003 and March 2, 2002. Payment of dividends is
within the discretion of the Company's Board of Directors and depends upon
various factors including the earnings, capital requirements and financial
condition of the Company (see Note 4 to Notes to Consolidated Financial
Statements regarding covenants in the Company's revolving credit agreement). The
Company intends generally to retain earnings, if any, to fund development and
growth of its business. The Company does not plan on paying dividends in the
near term.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below has been derived from the
Company's audited Consolidated Financial Statements for the fiscal years ended
March 1, 2003, March 2, 2002, March 3, 2001, February 26, 2000 and February 27,
1999. The selected financial data presented below should be read in conjunction
with such Financial Statements and notes thereto.
FISCAL YEAR ENDED
-------------------------------------------------------------
MARCH 1, MARCH 2, MARCH 3, FEBRUARY 26, FEBRUARY 27,
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA:
Net sales ................................... $281,505 $287,744 $342,316 $341,570 $343,858
Net income (loss) ........................... (9,035) (2,319) (8,333) 2,224 17,449
Net income (loss) per share -- basic ........ (0. 58) (0.15) (0.52) 0.14 1.00
Net income (loss) per share -- diluted ...... (0.58) (0.15) (0.52) 0.14 1.00
BALANCE SHEET DATA:
Working capital ............................. $ 77,342 $ 85,961 $ 86,638 $ 87,812 $101,592
Total assets ................................ 262,473 276,494 276,867 300,314 298,742
Other long term liabilities ................. 1,891 2,118 2,409 2,436 1,567
Shareholders' equity ........................ 230,154 241,457 243,935 253,428 258,760
5
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) includes forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995) and information relating to
the Company that are based on the beliefs of the management of the Company as
well as assumptions made by and information currently available to the
management of the Company. When used in this Annual Report, the words
"anticipate," "believe," "estimate," "expect," "intend," "plan," and similar
expressions, as they relate to the Company or the management of the Company,
identify forward-looking statements. Such statements reflect the current views
of the Company with respect to future events, the outcome of which is subject to
certain risks, including among others general economic and market conditions,
decreased consumer demand for the Company's products, possible disruptions in
the Company's computer or telephone systems, possible work stoppages, or
increases in labor costs, effects of competition, possible disruptions or delays
in the opening of new stores or inability to obtain suitable sites for new
stores, higher than anticipated store closings or relocation costs, higher
interest rates, unanticipated increases in merchandise or occupancy costs and
other factors which may be outside the Company's control. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results or outcomes may vary materially from those described
herein as anticipated, believed, estimated, expected, intended or planned.
Subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements in this paragraph and elsewhere described
in this Annual Report and other reports filed with the Securities and Exchange
Commission.
CRITICAL ACCOUNTING POLICIES AND ESTIMATE
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
appropriate application of certain accounting policies, many of which require us
to make estimates and assumptions about future events and their impact on
amounts reported in the financial statements and related notes. Since future
events and their impact cannot be determined with certainty, the actual results
will inevitably differ from our estimates. Such differences could be material to
the consolidated financial statements.
The Company believes application of accounting policies, and the estimates
inherently required by the policies, are reasonable. These accounting policies
and estimates are constantly reevaluated, and adjustments are made when facts
and circumstances dictate a change. Historically, the Company has found the
application of accounting policies to be appropriate, and actual results have
not differed materially from those determined using necessary estimates.
The Company's accounting policies are more fully described in Note 1 to the
Consolidated Financial Statements, located in this Annual Report. The Company
has identified certain critical accounting policies that are described below.
MERCHANDISE INVENTORY - Inventories are valued at lower of cost or market
using the retail first-in, first-out ("FIFO") inventory method. Under the retail
inventory method ("RIM"), the valuation of inventories at cost and the resulting
gross margins are calculated by applying a calculated cost to retail ratio to
the retail value of inventories. RIM is an averaging method that has been widely
used in the retail industry due to its practicality. Additionally, it is
recognized that the use of RIM will result in valuing inventories at the lower
of cost or market if markdowns are currently taken as a reduction of the retail
value of inventories. Inherent in the RIM calculation are certain significant
management judgments and estimates including, among others, merchandise markon,
markups, and markdowns, which significantly impact the ending inventory
valuation at cost as well as resulting gross margins. Management believes that
the Company's RIM and application of FIFO provides an inventory valuation which
reasonably approximates cost using a first-in, first-out assumption and results
in carrying value at the lower of cost or market. If actual market conditions
are less favorable than those projected by management, additional markdowns may
be required.
LONG-LIVED ASSET - In evaluation of the fair value and future benefits of
long-lived assets, the Company performs an analyses of the anticipated
undiscounted future net cash flows of the related long-lived assets. If the
carrying value of the related asset exceeds the undiscounted cash flows, the
Company reduces the carrying value to its fair value, which is generally
calculated using discounted cash flows. Various factors including future sales
growth and profit margins are included in this analysis. To the extent these
future projections or our strategies change, the conclusion regarding impairment
may differ from the Company's current estimates.
6
DEFERRED TAX VALUATION ALLOWANCE - The Company records a valuation
allowance to reduce its deferred tax assets to the amount that is more likely
than not to be realized. The Company has considered future taxable income and
ongoing prudent and feasible tax planning strategies in assessing the need for
the valuation allowance, if the Company were to determine that it would be able
to realize its deferred tax assets in the future in excess of its net recorded
amount, an adjustment to the deferred tax asset would increase income in the
period such determination was made. Likewise, should the Company determine that
it would not be able to realize all or part of our net deferred tax asset in the
future, an adjustment to the deferred tax asset would be charged to income in
the period such determination was made.
SELF INSURANCE ACCRUALS - The Company had been self-insured for workers'
compensation liability claims. The Company is responsible for the payment of
claims from prior years. In estimating the obligation associated with incurred
losses the Company utilizes loss development factors. These development factors
utilize historical data to project incurred losses. Loss estimates are adjusted
based upon actual claims settlements and reported claims.
RESULTS OF OPERATIONS
The following discussion compares the fiscal years ended March 1, 2003,
March 2, 2002 and March 3, 2001. The fiscal years ended March 1, 2003 and March
2, 2002 were each comprised of 52 weeks. The fiscal year ended March 3, 2001 was
comprised of 53 weeks.
FISCAL YEAR ENDED MARCH 1, 2003 (FISCAL 2002) COMPARED TO FISCAL YEAR ENDED
MARCH 2, 2002 (FISCAL 2001)
Net sales for the fiscal year ended March 1, 2003 were $281,505,000, a
decrease of $6,239,000 (2.2%) as compared to net sales of $287,744,000 for the
fiscal year ended March 2, 2002. The decline in sales for fiscal 2002 is largely
attributable to the five closed stores amounting to approximately $9,850,000,
located in Chicago, IL, Pittsburgh, PA, Sharonville, OH, Franklin Mills, PA and
Potomac, VA. Comparable store sales increased 1.1% for the fiscal year ended
March 1, 2003 compared to the fiscal year ended March 2, 2002.
Gross profit for the fiscal year ended March 1, 2003 was $108,468,000, a
decrease of $113,000 (38.5% as a percentage of net sales) as compared to
$108,581,000 (37.7% as a percentage of net sales) for the fiscal year ended
March 2, 2002. Although the gross profit percentage of net sales improved in
fiscal 2002, the decline in net sales, as noted above, accounts for the
shortfall in gross profit dollars.
Selling, general and administrative (SG&A) expense was $76,998,000 (27.4%
as a percentage of net sales) for the fiscal year ended March 1, 2003 as
compared to $78,261,000 (27.2% as a percentage of net sales) for the fiscal year
ended March 2, 2002. The reduced expenses in fiscal 2002 is largely attributable
to the closing of five stores located in Chicago, IL, Pittsburgh, PA,
Sharonville, OH, Franklin Mills, PA and Potomac, VA which was partially offset
by increases in health insurance, pension and insurance premiums in the existing
stores. SG&A increased as a percentage of sales slightly due to some
inefficiencies associated operating less stores.
Advertising expense for the fiscal year ended March 1, 2003 was $10,126,000
(3.6% as a percentage of net sales) as compared to $8,936,000 (3.1% as a
percentage of net sales) for the fiscal year ended March 2, 2002. The increase
in fiscal 2002 compared to fiscal 2001 of $1,190,000 is primarily due to reduced
advertising in September of fiscal 2001 due to the terrorist attacks of
September 11, 2001 and to increased direct mail advertising expenditures in
fiscal 2002.
Occupancy costs were $17,702,000 (6.3% as a percentage of net sales) for
the fiscal year ended March 1, 2003 as compared to $18,807,000 (6.5% as a
percentage of net sales) for the fiscal year ended March 2, 2002. Total
occupancy costs declined by approximately $1,105,000 compared to a year ago. The
decline is attributable to a decrease of $1,300,000 for the five closed stores
(Chicago, IL, Pittsburgh, PA, Sharonville, OH, Franklin Mills, PA and Potomac,
VA) which was partially offset by an increase in existing stores.
Depreciation and amortization expense amounted to $10,908,000 (3.9% as a
percentage of net sales) for the fiscal year ended March 1, 2003 as compared to
$11,520,000 (4.0% as a percentage of net sales) for the fiscal year ended March
2, 2002.
Other income was recorded by the Company for fiscal 2002 and 2001 amounting
to $1,298,000 and $6,289,000, respectively, as follows:
FISCAL 2002 FISCAL 2001
----------- -----------
Insurance recovery from employee theft $ -- $3,000,000
Restitution from employee relating to theft 750,000 1,811,000
Insurance recovery on Trinity store loss (9/11) 416,000
Gain on stock due demutualization -- 1,058,000
Reversal of closed store lease liability -- 377,000
Wal-Mart penalty on Dallas store purchase 100,000
Other 32,000 43,000
---------- ----------
Total $1,298,000 $6,289,000
========== ==========
7
During the second quarter of fiscal 2002, the Company recorded a store
closing cost of $4,000,000 relating to the closing of its downtown Chicago store
which closed September 14, 2002. This action was taken by the Company to cut
losses being incurred at the store due to construction at the neighboring
premises which will continue over a two to three year period. The Company has
estimated and recorded an additional charge of $4,000,000 for the write off of
capital assets and other potential liabilities in the fourth quarter of this
fiscal year. The Company has a potential rent liability of $11,282,000 for the
remainder of the nine-year lease term, and the landlord has commenced an action
relating to the rent liability which the Company is defending.
The net loss before income taxes was $13,840,000 for the fiscal year ended
March 1, 2003 as compared to a net loss of $2,559,000 for the fiscal year ended
March 2, 2002. This $11,281,000 variance is attributable to the recording of
store closing costs of $8,000,000 in the second and fourth quarters of this
fiscal year, increased advertising expenses of $1,189,000, and insurance
recoveries of $4,061,000 and stock due demutualization of $1,058,000 recorded
during fiscal 2001 and not received during the current year. These decreases
were partially offset by reductions to selling, general, and administrative
expenses of $1,261,000, occupancy costs of $1,108,000 and depreciation expense
of $612,000.
For the fiscal year ended March 1, 2003, the effective income tax rate was
34.7% compared to 9.4% for the fiscal year ended March 2, 2002. The fluctuation
on the effective income tax rate is due to the non-deductibility of officer's
life insurance premiums.
FISCAL YEAR ENDED MARCH 2, 2002 (FISCAL 2001) COMPARED TO FISCAL YEAR ENDED
MARCH 3, 2001 (FISCAL 2000)
Net sales for the fiscal year ended March 2, 2002, were $287,744,000, a
decrease of $54,572,000 (15.9%) as compared to net sales of $342,316,000 for the
fiscal year ended March 3, 2001. The decline in sales for fiscal 2001 as
compared to fiscal 2000 can be largely attributable to (1) a 13.2% decline in
comparable store sales due to the difficult economic environment, (2) the extra
week in fiscal 2000 which amounted to approximately $4,013,000, (3) the closing
of three stores located in Boston, MA, Gurnee, IL and Sharonville, OH, which
sales in fiscal 2000 amounted to approximately $9,200,000 and (4) the closing of
the Trinity store located near the World Trade Center site for a period of 18
days following September 11, 2001, which store suffered a sales decline in
fiscal 2001 of approximately $4,500,000.
Gross profit for the fiscal year ended March 2, 2002 was $108,581,000, a
decrease of $18,306,000 (37.7% as a percentage of net sales) as compared to
$126,887,000 (37.1% as a percentage of net sales) for the fiscal year ended
March 31, 2001. Although the gross profit percentage improved in fiscal 2001,
the decline in sales, as noted above, accounts for the shortfall in gross profit
dollars.
Selling, general and administrative (SG&A) expense was $78,261,000 (27.2%
as a percentage of net sales) for the fiscal year ended March 2, 2002 as
compared to $84,810,000 (24.8% as a percentage of net sales) for the fiscal year
ended March 3, 2001. The expenses of the closed stores (Gurnee, IL, Boston, MA,
Sharonville, OH, Franklin Mills, PA and Potomac, VA) amounted to approximately
$3,900,000, and the remainder of the decline results from greater expense
efficiencies in the existing stores. The increase as a percentage of sales is
due principally to a lack of sales leverage in relation to our fixed costs.
Advertising expense for the fiscal year ended March 2, 2002 was $8,936,000
(3.1% as a percentage of net sales) as compared to $10,122,000 (3.0% as a
percentage of net sales) for the fiscal year ended March 3, 2001. The decrease
is primarily due to reduced advertising in certain markets.
Occupancy costs were $18,807,000 (6.5% as a percentage of net sales) for
the fiscal year ended March 2, 2002 as compared to $21,366,000 (6.2% as a
percentage of net sales) for the fiscal year ended March 3, 2001. Total
occupancy costs declined by approximately $2,559,000 compared to a year ago. Of
this decline, $2,400,000 is attributable to the five closed stores (Gurnee, IL,
Boston, MA, Sharonville, OH, Franklin Mills, PA and Potomac, VA).
Depreciation and amortization amounted to $11,520,000 (4.0% as a percentage
of net sales) for the fiscal year ended March 2, 2002 as compared to $11,468,000
(3.4% as a percentage of net sales) for the fiscal year ended March 3, 2001.
Other income was recorded by the Company amounting to $6,289,000 as
follows:
Insurance recovery from employee theft $3,000,000
Restitution from the employee relating to the theft 1,811,000
Gain on stock due demutualization 1,058,000
Reversal of closed store lease liability 377,000
Other 43,000
----------
Total $6,289,000
==========
8
During the third quarter of fiscal 2000, the Company recorded a store
closing charge of $12.9 million relating to a plan to close five stores,
including its store in Boston, Massachusetts, and an additional lease commitment
associated with a previously closed store. The action was taken by the Company
to enhance competitiveness, reduce expenses and to improve efficiencies.
The net loss before income taxes was $2,559,000 for the fiscal year ended
March 2, 2002 as compared to a net loss before income taxes of $13,661,000 for
the fiscal year ended March 3, 2001. This variance is largely attributable to
the recording of a store closing charge in the third quarter of fiscal 2000 for
the closing of certain stores.
For the fiscal year ended March 2, 2002, the effective income tax rate was
9.4% compared to 39% for the fiscal year ended March 3, 2001. The reduced income
tax rate is due to the non-deductibility of officer's life insurance premiums.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at March 1, 2003 was $77,342,000 a decrease of $8,619,000
from March 2, 2002, and the ratio of current assets to current liabilities was
3.54 to 1 as compared to 3.61 to 1 at March 2, 2002. The increased loss this
year is largely attributable to the decline in working capital.
Net cash provided by operating activities totaled $7,251,000 for fiscal
2002 as compared to $20,145,000 for fiscal 2001. The major reasons for this
decrease in cash provided by operating activities can be attributed to higher
net loss and decreases in accounts payable.
Net cash used in investing activities was $5,021,000 for fiscal 2002 as
compared to $7,985,000 for fiscal 2001. Purchase of property and equipment
totaled $3,116,000 and $7,990,000 for fiscal years 2002 and 2001, respectively.
The Company purchased a shopping center in West Palm Beach, FL, for
approximately $5,700,000 in July 2001 (fiscal 2001). The Company's West Palm
Beach store is located in this shopping center.
Net cash used in financing activities was $2,518,000 for the fiscal year
ended March 1, 2003 as compared to $160,000 for the fiscal year ended March 2,
2002. This increase in net cash used in financing activities resulted from the
repurchase of Company stock in fiscal 2002 amounting to $2,585,000 which was
partially offset by the exercise of stock options amounting to $67,000.
The Company has a revolving credit agreement with a bank for a line of
credit not to exceed $20,000,000 through July 31, 2003. The agreement contains
financial covenants, with respect to consolidated tangible net worth, as
defined, working capital and maximum capital expenditures, including dividends
(defined to include cash repurchases of capital stock), as well as other
financial ratios. Except for funds provided from this revolving credit
agreement, the Company has satisfied its operating and capital expenditure
requirements, including those for the operation and expansion of stores, from
internally generated funds. For the fiscal year ended March 1, 2003, under the
revolving credit agreement, there were no borrowings compared to $1,250,000 for
the period ended March 2, 2002.
In addition, the Company has a separate $10,000,000 credit facility
with another bank available for the issuance of letters of credit for the
purchase of merchandise. This agreement may be canceled at any time by either
party. At March 1, 2003 and at March 2, 2002, the Company had $2,754,872 and
$4,564,076, respectively, in outstanding letters of credit.
The Company has planned capital expenditures of approximately $5,000,000
for the fiscal year ending February 28, 2004.
The Company's Board of Directors had authorized the repurchase of up to 20%
of its outstanding shares of Common Stock at prevailing market prices through
June 7, 2004. During the year ended March 1, 2003, the Company has purchased
361,000 shares which represented 2.3% of its outstanding shares at a total cost
of $2,604,000.
Management believes that existing cash, internally generated funds, trade
credit and funds available from the revolving credit agreement will be
sufficient for working capital and capital expenditure requirements for the
fiscal year 2003.
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.
9
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
----------------------------------------------------------------------
(in thousands of dollars) Within After 5
Total 1 year 2-3 years 4-5 years years
----------- ---------- ----------- ----------- -----------
CONTRACTUAL OBLIGATIONS
Employment Agreements $ 2,550,000 $ 400,000 $ 800,000 $ 900,000 $ 450,000
----------- ---------- ----------- ----------- -----------
Operating Leases 58,411,800 7,861,892 15,706,760 12,841,398 22,001,750
----------- ---------- ----------- ----------- -----------
Total Contractual Cash
Obligations $60,961,800 $8,261,892 $16,506,760 $13,741,398 $22,451,750
=========== ========== =========== =========== ===========
AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
------------------------------------------------------------------
(in thousands of dollars) Total
Amounts Within After 5
Committed 1 year 2-3 years 4-5 years years
---------- ---------- ---------- ---------- ----------
OTHER COMMERCIAL COMMITMENTS
Lines of Credit $ -- $ -- -- -- --
Letters of Credit 2,754,872 2,754,872
---------- ---------- ---------- ---------- ----------
Total Commercial Commitments $2,754,782 $2,754,872 -- -- --
========== ========== ========== ========== ==========
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "Business Combinations" ("SFAS 141") and Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS
142"). SFAS 141 eliminates the pooling-of-interests method of accounting for
business combinations initiated after June 30, 2001 and modifies the application
of the purchase accounting method effective for transactions that are completed
after June 30, 2001. SFAS 142 eliminates the requirement to amortize goodwill
and intangible assets having indefinite useful lives but requires that at least
annually for impairment. Intangible assets that have finite lives will continue
to be amortized over their useful lives. The adoption of SFAS 141 and 142 did
not have a material effect on the Company's financial position or operations.
In October 2001, the FASB issued Statement of Financial Accounting
Standards 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"). SFAS No. 144 addresses the accounting and reporting for the
impairment or disposal of long-lived assets. The statement provides a single
accounting model for long-lived assets to be disposed of. New criteria must be
met to classify the asset as an asset held-for-sale. This statement also focuses
on reporting the effects of a disposal of a segment of business. This statement
is effective for fiscal years beginning after December 15, 2001. The Company
adopted SFAS 144 as of March 3, 2002, and the adoption did not have a material
impact on the Company's financial position or results of operations.
In April 2002, Statement of Financial Accounting Standards, No. 145,
"Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No.
13, and Technical Corrections" ("SFAS 145") was issued. SFAS 145 rescinds SFAS 4
and 64, which required gains and losses from extinguishment of debt to be
classified as extraordinary items. SFAS also rescinds SFAS 44 since the
provisions of the Motor Carrier Act of 1980 are complete. SFAS 145 also amends
SFAS 13 eliminating inconsistencies in certain sale-leaseback transactions. The
provisions of SFAS 145 are effective for fiscal years beginning after May 15,
2002. Any gain or loss on extinguishment of debt that was classified as an
extraordinary item in prior periods presented shall be reclassified to interest
expense. The Company does not expect that the adoption of SFAS 145 will have a
material effect on the Company's financial position or results of operations.
10
Statement of Financial Accounting Standards, No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"), was issued in July
2002. SFAS 146 requires companies to recognize costs associated with exit or
disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. SFAS 146 supercedes EITF Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (Including Certain Costs Incurred in a Restructuring)." SFAS
146 is to be applied prospectively to exit or disposal activities initiated
after December 31, 2002. This pronouncement did not have a material effect on
the Company's financial position or results of operations.
On December 31, 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, "Accounting for Stock-Based Compensation -Transition and
Disclosure" ("SFAS 148"). This standard amends SFAS No. 123, to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, SFAS
148 amends the disclosure requirements of SFAS 123 to require more frequent and
prominent disclosures in financial statements of the effects of stock-based
compensation. The transition guidance and annual disclosure provisions of SFAS
148 are effective for fiscal years ending after December 15, 2002. The interim
disclosure provisions are effective for financial reports containing financial
statements for interim periods beginning after December 15, 2002. The Company
has adopted the disclosure provisions of SFAS 148 as of March 1, 2003, as
required.
In November 2002, the Financial Accounting Standards Board ("FASB") issued
Interpretation Interpretation No. 45," Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others ("FIN 45"). FIN 45 requires the recognition of a liability for certain
guarantee obligations issued or modified after December 31, 2002. It also
clarifies disclosure requirements to be made by a guarantor for certain
guarantees. The disclosure provisions of FIN 45 are effective for fiscal years
ending after December 15, 2002. FIN 45 is not expected to have a material impact
on the Company's results of operations, financial position or cash flows, and
the Company has adopted the disclosure provisions of FIN 45 as of March 1, 2003.
On January 17, 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities" ("FIN 46"). FIN 46 requires certain variable
interest entities to be consolidated by the primary beneficiary of the entity if
the equity investors in the entity do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 is effective for all new variable interest
entities created or acquired after January 31, 2003. For variable interest
entities created or acquired prior to February 1, 2003, the provisions of FIN 46
must be applied for the first interim or annual period beginning after June 15,
2003. The adoption of FIN 46 did not have an impact on the Company's results of
operations, financial position or cash flows.
In February 2003, the Emerging Issues Task Force ("EITF") addressed EITF
Statement No. 02-16 ("EITF 02-16"), "Accounting by a Reseller for Cash
Consideration Received From a Vendor." EITF 02-16 provides accounting guidance
on how a reseller should characterize consideration given by a vendor and when
to recognize and how to measure that consideration in its income statement. EITF
02-16 is effective for all agreements entered into after December 31, 2002. We
have evaluated the provisions of EITF 02-16 and determined that this statement
did not have a material effect on our consolidated financial statements.
In April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" ("SFAS 149"). SFAS 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
133. The new guidance amends SFAS 133 for decisions made: (a) as part of the
Derivatives Implementation Group process that effectively required amendments to
SFAS 133, (b) in connection with other Board projects dealing with financial
instruments, and (c) regarding implementation issues raised in relation to the
application of the definition of a derivative, particularly regarding the
meaning of an "underlying" and the characteristics of a derivative that contains
financing components. The amendments set forth in SFAS 149 improve financial
reporting by requiring that contracts with comparable characteristics be
accounted for similarly. SFAS 149 is generally effective for contracts entered
into or modified after June 30, 2003 (with a few exceptions) and for hedging
relationships designated after June 30, 2003. The guidance is to be applied
prospectively. We do not expect the provisions of SFAS 149 to have a material
impact on our financial position or results of operations.
In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity"
("SFAS 150"). SFAS 150 improves the accounting for certain financial instruments
that, under previous guidance, issuers could account for as equity. The new
Statement requires that those instruments be classified as liabilities in
statements of financial position. We do not expect the provisions of SFAS 150 to
have a material impact on our financial position or results of operations.
11
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has exposure to interest rates under its unsecured revolving
credit facility. Interest on individual advances is payable quarterly at 1/2%
per annum below the bank's base rate, except that at the time of advance, the
Company has the option to select an interest rate based upon one of two other
alternative calculations, with such rate to be fixed for a period not to exceed
90 days. The average daily unused portion is subject to a commitment fee of 3/8
of 1% per annum.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements are filed together with
this Annual Report. See Index to Consolidated Financial Statements in Item 5.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
12
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as follows:
NAME AGE TITLE
---- --- -----
Sy Syms (1) (2)............... 77 Chairman of the Board and
Director of the Company
Marcy Syms (1) (2)............ 52 Chief Executive Officer / President
and Director of the Company
Antone F. Moreira ........... 66 Vice President, Chief Financial Officer,
Treasurer, Assistant Secretary
and Director of the Company
Harvey A. Weinberg (3) (4) ... 65 Director of the Company
David A. Messer (3) (4)...... 41 Director of the Company
Wilbur L. Ross, Jr (3) (4).... 65 Director of the Company
Ronald Zindman................ 53 Executive Vice President - General
Merchandise Manager
Allen Brailsford.............. 59 Executive Vice President - Operations
Myra Butensky................. 44 Vice President - Divisional Merchandise
Manager Men's Tailored Clothing
James Donato.................. 47 Vice President - Operations
Elyse Marks................... 50 Vice President - MIS
John Tyzbir................... 49 Vice President - Human Resources
(1) Member of the Executive Committee of the Company.
(2) Sy Syms is the father of Marcy Syms.
(3) Member of the Stock Option - Compensation Committee of the Company.
(4) Member of the Audit Committee of the Company.
The members of the Company's Board of Directors hold office until the next
annual meeting of shareholders and until their successors are duly elected and
qualified. Executive officers are elected annually by the Board of Directors of
the Company and serve at the pleasure of the Board. Marcy Syms is the daughter
of Sy Syms. There are no other family relationships between any directors or
executive officers of the Company. None of the organizations with which these
persons were previously associated is a parent, subsidiary or other affiliate of
the Company except as otherwise set forth.
13
SY SYMS has been Chairman of the Board, Chief Executive Officer and a
Director of the Company and/or its predecessors since 1959. Mr. Syms was Chief
Operating Officer of the Company from 1983 to 1984. Mr. Syms has been a Director
of Israel Discount Bank of New York since December 1991. On January 22, 1998, Sy
Syms resigned his position as Chief Executive Officer. Since that date, Mr. Syms
has been Chairman of the Board.
MARCY SYMS has been President and a Director of the Company since 1983 and
Chief Operating Officer of the Company since 1984. On January 22, 1998, Marcy
Syms was named Chief Executive Officer / President.
ANTONE F. MOREIRA has been Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary of Syms Corp since May 1997. From 1996 to May
1997, Mr. Moreira was a financial consultant with Equitable Assurance Society, a
financial services organization. From 1990 to 1995, Mr. Moreira was Executive
Vice President and Chief Financial Officer of Stuarts Department Stores, Inc., a
regional discount department store chain operating in New England. Mr. Moreira
has been a Director of the Company since May 1997.
HARVEY A. WEINBERG has been a consultant in various industries since April
1994. From April 1992 to April 1994, he was President and Chief Executive
Officer of HSSI, Inc., a retailer of men's and women's apparel. From 1987 to
September 1990, he was Chief Executive Officer and Vice Chairman of the Board of
Directors of Hartmarx Corporation and from 1990 to September 1992, he served as
Chairman of the Board of Hartmarx Corporation. He is a trustee of Glimcher
Realty Trust, a real estate investment trust. He is also a Director of R.G.
Barry Corp. He has been a Director of the Company since December 1992.
DAVID A. MESSER has been President of Sempra Energy Trading, a subsidiary
of Sempra Energy, Inc. (NYSE: SRE), since January 1998. Prior to January 1998,
Mr. Messer was President of AIG Trading Corporation, where he had been employed
since March 1990. He has been a Director of the Company since July 1996.
WILBUR L. ROSS, JR. has been a principal of W L Ross & Company LLC since
2000. Prior to 2000, Mr. Ross was Managing Director of Rothchild, Inc. from 1976
to 1999. He was a Director of the Company from 1983 through March 1999 and was
reappointed Director in October 2000.
RONALD ZINDMAN has been Executive Vice President - General Merchandise
Manager since March 1997. He was Vice President, General Merchandise Manager,
Ladies, Mens and Haberdashery from July 1994 to March 1997. Previously, Mr.
Zindman was Vice President - General Merchandise Manager Ladies from March 1993
to July 1994 and a buyer of men's and women's merchandise from March 1990 to
March 1993.
ALLEN BRAILSFORD has been Executive Vice President since April 2001. Mr.
Brailsford was Vice President of Operations of the Company from March 1992 to
March 2001, and from March 1985 to March 1992, he was Director of Distribution
of the Company.
MYRA BUTENSKY has been Vice President - Divisional Merchandise Manager,
Men's Tailored Clothing of the Company since January 1999. From May 1998 to
January 1999, Ms. Butensky was Divisional Merchandise Manager, Ladies of the
Company. From June 1991 to April 1998, Ms. Butensky was a ladies buyer. Prior to
joining the Company in 1991, Ms. Butensky was a buyer with Popular Trading Club,
Inc, and also spent 10 years with Macy's in a number of buying positions.
JAMES DONATO has been Vice President of Operations of the Company since
April 2001. From November 1997 to March 2001 he was Director of Store Planning
of the Company. Prior to November 1997, Mr. Donato was in store management as a
District Manager and Store Manager of the Company.
ELYSE MARKS has been Vice President of MIS of the Company since April 2001.
From November 1999 to March 2001 Ms. Marks was Director of MIS of the Company.
From January 1998 to November 1999, Ms. Marks was manager of MIS and store
systems of the Company. From 1983 to 1987, she was also in store management for
the Company.
JOHN TYZBIR has been Vice President - Human Resources of the Company since
April 1999. From January 1995 to October 1997, Mr. Tyzbir was Director of Human
Resources of Zallie Supermarkets Corp. From June 1991 to January 1995, Mr.
Tyzbir was Director of Human Resources and Planning of Carson Pirie Scott Inc.
14
ITEM 11. EXECUTIVE COMPENSATION
In accordance with General Instruction G(3) of the General Instructions to
Form 10-K, the information called for by Item 11 is omitted from this Annual
Report and is incorporated by reference to the definitive Proxy Statement to be
filed by the Company pursuant to Regulation 14A of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, which the
Company will file not later than 120 days after March 1, 2003, the end of the
fiscal year covered by this Annual Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth equity compensation plan information as of March
1, 2003:
- -------------------------- ----------------------------------------------------------------------
EQUITY COMPENSATION PLAN INFORMATION
- -------------------------- --------------------- ----------------------- -------------------------
Number of securities
remaining available
Number of securities for future issuance
to be issued Weighted-average under equity
upon exercise of exercise price of compensation plans
outstanding options, outstanding options (excluding securities
Plan category warrants and rights warrants and rights reflected in column (a))
- ------------- ------------------- ------------------- ------------------------
(a) (b) (c)
- -------------------------- --------------------- ----------------------- ------------------------
Equity compensation
plans approved by
security holders......... 991,150 $7.21 508,850
- -------------------------- --------------------- ----------------------- ------------------------
Equity compensation
plans not approved by
security holders.......... N/A N/A N/A
- -------------------------- --------------------- ----------------------- ------------------------
Total..................... 991,150 $7.21 508,850
- -------------------------- --------------------- ----------------------- ------------------------
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 March 1, 2003, the end of the
fiscal year covered by this Annual Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In accordance with General Instruction G(3) of the General Instructions to
Form 10-K, the information called for by Item 13 is omitted from this Annual
Report and is incorporated by reference to the definitive Proxy Statement to be
filed by the Company pursuant to Regulation 14A of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, which the
Company will file not later than 120 days after March 1, 2003, the end of the
fiscal year covered by this Annual Report.
ITEM 14. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Based on the evaluation of the Company's disclosure controls and procedures
as of a date within 90 days of the filing date of this annual report, each
of Marcy Syms, the Chief Executive Officer of the Company, and Antone F.
Moreira, the Chief Financial Officer of the Company, have concluded that
the Company's disclosure controls and procedures are effective in ensuring
that information required to be disclosed by the Company in the reports
that it files or submits under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported, within the time
period specified by the Securities and Exchange Commission's rules and
forms.
(b) Changes in Internal Controls
There were no specific changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
15
PART IV
-------
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
PAGE NUMBER
(a)(1) Financial Statements:
Independent Auditors' Report .............................. F-1
Consolidated Balance Sheets ............................... F-2
Consolidated Statements of Operations ..................... F-3
Consolidated Statements of Shareholders' Equity ........... F-4
Consolidated Statements of Cash Flows ..................... F-5
Notes to Consolidated Financial Statements ................ F-6
(a)(2) Financial Statement Schedules:
All schedules are omitted because they are not applicable, or not required,
or because the required information is included in the consolidated financial
statements or notes thereto.
(a)(3) List of Exhibits:
The following exhibits which are marked with an asterisk are filed as part
of this Annual Report and the other exhibits set forth below are incorporated by
reference (utilizing the same exhibit numbers, except as stated otherwise below)
from (i) the Company's Registration Statement on Form S-1 under the Securities
Act of 1933 (Registration No. 2-85554) filed August 2, 1983 and declared
effective September 23, 1983 or (ii) where indicated, the Company's reports on
Form 8-K, Form 10-Q or Form 10-K or the Company's Proxy Statement (Commission
File No. 1-8564). Management contracts or compensatory plans or arrangements
required to be filed as exhibits are identified by a (+).
3.1 Certificate of Incorporation of Syms Corp, as amended
3.2 By-laws of Syms Corp
4.1 Specimen Certificate of Common stock
10.3 Elmsford (White Plains), New York Leased Premises
10.3a Lease, June 21, 1977
10.3b Lease Modification, December 28, 1978
10.3c Lease Modification, July 26, 1983
10.3d Consent, July 29, 1983
10.3e Parking Area Lease No. 1, July 29, 1969
10.3f Parking Area Sublease No. 1, November 29, 1974
10.3g Parking Area Lease No. 2, June 23, 1969
10.3h Parking Area Sublease No. 2, November 29, 1974
10.3i Assignment and Assumption, July 29, 1983
10.3j* Third Lease Modification Agreement, December 1, 2002
10.4 Ground Lease at One Emerson Lane, Township of Secaucus, Hudson County,
New Jersey Assignment and Assumption of Ground Lease, dated May 8,
1986, to Registrant (exhibit 28.1 to 8-K Report dated May 1986)
10.21+ Syms Corp 1983 Incentive Stock Option and Appreciation Plan as Amended
and Restated (Exhibit A to Company's Proxy Statement for the 1993
Annual Meeting of Shareholders)
10.32 Revolving Credit Agreement dated as of December 1, 1993 between Syms
Corp and Summit Bank (successor to United Jersey Bank) (8-K Report
dated December 7, 1993)
10.33 Form of Indemnification Agreement between Registrant and Directors and
Executive Officers of the Registrant (10-K Report for fiscal year ended
March 2, 1996)
10.35+ Employment Agreement dated November 1, 1996 between Syms Corp and
Ronald Zindman (10-K Report for fiscal year ended March 1, 1997)
10.36+ Stock Option Certificate for Ronald Zindman (10-K Report for fiscal
year ended March 1, 1997)
16
10.38 First Amendment to Revolving Credit Agreement, dated November 24, 1997,
between Syms Corp and Summit Bank. (10-K Report for fiscal year ended
February 28, 1998)
10.39 Credit Program Agreement, dated January 27, 2000 between Syms Corp and
Conseco Finance Corp (10K Report for fiscal year ended February 26,
2000)
10.40 Second Amendment to Revolving Credit Agreement, dated as of May 27,
2000, between Syms Corp and Fleet National Bank (successor to Summit
Bank) (10-Q Report for quarter ended May 27, 2000)
10.41+ Amendment to the Amended and Restated Incentive Stock Option and
Appreciation (10-Q Report for quarter ended November 25, 2000)
10.42 Third Amendment to Revolving Credit Agreement, dated as November 24,
2000, between Syms Corp and Fleet National Bank (successor to Summit
Bank) (10-K Report for fiscal year ended March 3, 2001)
10.43 Fourth Amendment to Revolving Credit Agreement, dated as of May 4,
2001, between Syms Corp and Fleet National Bank (10-K Report for fiscal
year ended March 3, 2001)
10.45 Fifth Amendment to Revolving Credit Agreement dated as of May 3, 2002,
between Syms Corp and Fleet National Bank
10.46 Agreement and Plan of Reorganization, dated as of May 1, 2002, between
Stanley Blacker, Inc. and Syms Corp.
10.47 Sixth Amendment to Revolving Credit Agreement, dated as of August 19,
2002, between Syms Corp and Fleet National Bank (10-Q Report for fiscal
quarter ended August 31, 2002)
21 List of Subsidiaries of the Company
23* Consent of Deloitte & Touche LLP
99.1* Certification of Marcy Syms pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2* Certification of Antone F. Moreira pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K:
During the quarter ended March 1, 2003, no reports on Form 8-K were filed.
17
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SYMS CORP
By: /s/ Marcy Syms
-------------------------------
Marcy Syms
Chief Executive Officer / President
Date: May 28, 2003
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
- --------- ----- ----
/s/ Sy Syms Chairman of the Board May 28, 2003
- ----------------------- and Director
Sy Syms
/s/ Marcy Syms Chief Executive Officer/President May 28, 2003
- ----------------------- and Director
Marcy Syms (Principal executive officer)
/s/ Antone F. Moreira Vice President,
- ----------------------- Chief Financial Officer,
Antone F. Moreira Assistant Secretary and Director May 28, 2003
(Principal financial and
accounting officer)
/s/ Harvey A. Weinberg Director May 28, 2003
- -----------------------
Harvey A. Weinberg
/s/ David A. Messer Director May 28, 2003
- -----------------------
David A. Messer
/s/ Wilbur L. Ross, Jr. Director May 28, 2003
- -----------------------
Wilbur L. Ross, Jr.
18
I, Marcy Syms, certify that:
1. I have reviewed this annual report on Form 10-K of Syms Corp;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 28, 2003
/s/ Marcy Syms
--------------
Marcy Syms
Chief Executive Officer
19
I, Antone F. Moreira, certify that:
1. I have reviewed this annual report on Form 10-K of Syms Corp;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 28, 2003
/s/ Antone F. Moreira
---------------------
Antone F. Moreira
Chief Financial Officer
20
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Syms Corp
Secaucus, New Jersey
We have audited the accompanying consolidated balance sheets of Syms Corp and
Subsidiaries as of March 1, 2003 and March 2, 2002, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended March 1, 2003. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Syms Corp and Subsidiaries as of
March 1, 2003 and March 2, 2002, and the results of their operations and their
cash flows for each of the three years in the period ended March 1, 2003, in
conformity with accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP /s/
Parsippany, New Jersey
April 24, 2003
F-1
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
MARCH 1, MARCH 2,
2003 2002
-------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 19,197 $ 19,485
Merchandise inventories 78,151 86,810
Deferred income taxes 4,143 6,514
Prepaid expenses and other current assets 6,280 6,071
-------- --------
Total current assets 107,771 118,880
PROPERTY AND EQUIPMENT - NET 135,460 147,186
DEFERRED INCOME TAXES 9,397 2,309
OTHER ASSETS 9,845 8,119
-------- --------
TOTAL ASSETS $262,473 $276,494
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 12,639 $ 17,867
Accrued expenses 12,099 8,845
Accrued insurance 2,339 3,144
Obligation to customers 3,352 3,063
-------- --------
Total current liabilities 30,429 32,919
OTHER LONG TERM LIABILITIES 1,891 2,118
COMMITMENTS (Note 8) -- --
SHAREHOLDERS' EQUITY:
Preferred stock, par value $100 per share - authorized
1,000 shares; none outstanding -- --
Common stock, par value $0.05 per share - authorized
30,000 shares; 15,435 shares outstanding as of
March 1, 2003 (net 2,513 treasury shares) and
15,737 shares outstanding as of March 2, 2002
(net of 2,152 treasury shares) 772 787
Additional paid-in capital 14,092 13,760
Treasury stock (21,572) (18,987)
Retained earnings 236,862 245,897
-------- --------
Total shareholders' equity 230,154 241,457
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $262,473 $276,494
======== ========
See Notes to Consolidated Financial Statements
F-2
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEAR ENDED
-------------------------------------
MARCH 1, MARCH 2, MARCH 3,
2003 2002 2001
--------- --------- ---------
NET SALES $ 281,505 $ 287,744 $ 342,316
Cost of goods sold 173,037 179,163 215,429
--------- --------- ---------
Gross profit 108,468 108,581 126,887
EXPENSES
Selling, general and administrative 76,998 78,261 84,810
Advertising 10,126 8,936 10,122
Occupancy 17,702 18,807 21,366
Depreciation and amortization 10,908 11,520 11,468
Other income (1,298) (6,289) --
Special charges 8,000 -- 12,935
--------- --------- ---------
Loss from operations (13,968) (2,654) (13,814)
Interest income - net (128) (95) (153)
--------- --------- ---------
Loss before income taxes (13,840) (2,559) (13,661)
Benefit for income taxes (4,805) (240) (5,328)
--------- --------- ---------
NET LOSS $ (9,035) $ (2,319) $ (8,333)
========= ========= =========
Net Loss Per Share - basic $ (0.58) $ (0.15) $ (0.52)
========= ========= =========
Weighted Average Shares
Outstanding -- basic 15,661 15,741 15,950
========= ========= =========
Net Loss Per Share - diluted $ (0.58) $ (0.15) $ (0.52)
========= ========= =========
Weighted Average Shares
Outstanding -- diluted 15,661 15,741 15,950
========= ========= =========
See Notes to Consolidated Financial Statements
F-3
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
(IN THOUSANDS)
PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------- ----------------- PAID-IN TREASURY RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK EARNINGS TOTAL
------ ------ ------- ------ ------- -------- --------- ---------
BALANCE AS OF FEBRUARY 26, 2000 -- -- 15,960 798 13,752 (17,671) 256,549 253,428
Stock buyback -- -- (200) (10) -- (1,150) -- (1,160)
Net loss -- -- -- -- -- -- (8,333) (8,333)
------ ------ ------- ----- ------- -------- --------- ---------
BALANCE AS OF MARCH 3, 2001 -- -- 15,760 788 13,752 (18,821) 248,216 243,935
Exercise of options -- -- 1 -- 8 -- -- 8
Stock buyback -- -- (24) (1) -- (166) -- (167)
Net loss -- -- -- -- -- -- (2,319) (2,319)
------ ------ ------- ----- ------- -------- --------- ---------
BALANCE AS OF MARCH 2, 2002 -- -- 15,737 787 13,760 (18,987) 245,897 241,457
Exercise of stock options -- -- 15 1 85 -- -- 86
Issuance of stock for
Stanley Blacker acquisition -- -- 44 2 248 -- -- 250
Stock buyback -- -- (361) (18) -- (2,586) -- (2,604)
Net loss -- -- -- -- -- -- (9,035) (9,035)
------ ------ ------- ----- ------- -------- --------- ---------
BALANCE AS OF MARCH 1, 2003 -- $ -- 15,435 $ 772 $14,093 $(21,573) $ 236,862 $ 230,154
====== ====== ======= ===== ======= ======== ========= =========
See Notes to Consolidated Financial Statements
F-4
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FISCAL YEAR ENDED
-------------------------------------
March 1, March 2, March 3,
2003 2002 2001
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (9,035) $ (2,319) $ (8,333)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 10,908 11,520 11,468
Deferred income taxes (2,634) 353 (5,039)
Gain on sale of property and equipment -- (133) (337)
Fixed asset impairment 3,933 -- --
Non cash impairment charge -- -- 6,473
(Increase) decrease in operating assets:
Merchandising inventories 8,659 12,376 17,171
Prepaid expenses and other current assets (105) (1,833) (1,236)
Other assets (1,726) (1,924) (1,559)
Increase (decrease) in operating liabilities:
Accounts payable (5,260) 1,414 (10,921)
Accrued expenses 2,449 829 (3,183)
Obligations to customers 289 153 177
Other long term liabilities (227) (291) (27)
--------- --------- ---------
Net cash provided by operating activities 7,251 20,145 4,654
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Stanley Blacker, Inc. (1,905) -- --
Purchase of property and equipment (3,116) (7,990) (6,073)
Proceeds from sale of property and equipment -- 5 382
--------- --------- ---------
Net cash used in investing activities (5,021) (7,985) (5,691)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury shares (2,604) (167) (1,160)
Exercise of options 86 7 --
--------- --------- ---------
Net cash used in financing activities (2,518) (160) (1,160)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (288) 12,000 (2,197)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 19,485 7,485 9,682
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 19,197 $ 19,485 $ 7,485
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 374 $ 299 $ 311
========= ========= =========
Income taxes paid, net of refunds $ -- $ 3,127 $ 1,827
========= ========= =========
Stanley Blacker, Inc. acquisition financed
through stock issuance $ 250 $ -- $ --
========= ========= =========
See Notes to Consolidated Financial Statements
F-5
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED MARCH 1, 2003, MARCH 2, 2002 AND MARCH 3, 2001
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. PRINCIPAL BUSINESS - Syms Corp and subsidiaries (the "Company") operate a
chain of 40 "off-price" retail stores located throughout the Northeastern
and Middle Atlantic regions and in the Midwest, Southeast and Southwest.
Each Syms store offers a broad range of first quality, in-season
merchandise bearing nationally recognized designer or brand-name labels for
men, women and children.
b. PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
c. ACCOUNTING PERIOD - The fiscal years ended March 1, 2003 and March 2, 2002
were comprised of 52 weeks. The fiscal year ended March 3, 2001 was
comprised of 53 weeks.
d. CASH AND CASH EQUIVALENTS- Syms Corp considers credit card receivables and
all short-term investments with an original maturity of three months or
less as cash equivalents.
e. MERCHANDISE INVENTORIES - Merchandise inventories are stated at the lower
of cost or market on a first-in first-out (FIFO) basis, as determined by
the retail inventory method.
f. PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation and amortization are principally determined by the
straight-line method over the following estimated useful lives:
Buildings and improvements 15 - 39 years
Machinery and equipment 4 - 7 years
Furniture and fixtures 7-10 years
Leasehold improvements Lesser of life of the asset
or life of lease
g. INCOME TAXES - Deferred income taxes reflect the future tax consequences of
differences between the tax basis of assets and liabilities and their
financial reporting amounts at year end.
h. OBLIGATION TO CUSTOMERS - Obligations to customers represent credits issued
for returned merchandise as well as gift certificates.
i. USE OF ESTIMATES - The preparation of financial statements in conformity
with 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 provision, sales return,
self-insurance accruals and lives of long-lived assets. Actual results
could differ from those estimates.
j. 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.
F-6
k. COMPREHENSIVE INCOME - Comprehensive income is equivalent to the Company's
net income for fiscal years 2002, 2001 and 2000.
l. SEGMENT REPORTING - Statement of Financial Accounting Standards (SFAS) No.
131, "Disclosures about Segments of an Enterprise and Related Information"
establishes standards for reporting information about a company's operating
segments. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Company
operates in a single operating segment - the operation of retail off-price
stores. Revenues from external customers are derived from merchandise
sales. The Company's merchandise sales mix by product category for the last
three fiscal years was as follows:
FISCAL YEAR
----------------------
2002 2001 2000
---- ---- ----
Men's tailored clothes and haberdashery 52% 51% 54%
Women's dresses, suits, separates
and accessories 30% 31% 31%
Shoes 7% 7% 6%
Children's wear 8% 8% 7%
Luggage, domestics and fragrances 3% 3% 2%
--- --- ---
100% 100% 100%
The Company does not rely on any major customers as a source of revenue.
m. COMPUTER SOFTWARE COSTS - The Company capitalizes the cost of software
developed or purchased for internal use.
n. OTHER ASSETS - Other assets include $9,497,000 and $7,021,000 of cash
surrender value of officer's life insurance, and $349,000 and $1,099,000 of
other miscellaneous assets such as security deposits, a loan receivable
only at March 2, 2002, step rent receivables and deferred lease acquisition
costs at March 1, 2003 and March 2, 2002, respectively.
o. ACCOUNTING FOR STOCK-BASED COMPENSATION - The Company complies with
Statement of Financial Accounting Standards No. 123 "Accounting for
Stock-Based Compensation" ("SFAS No. 123"). This statement defines a fair
value based method whereby compensation cost is measured at the grant date
based on the fair value of the award and is recognized over the service
period, which is usually the vesting period. Under SFAS No. 123, companies
are encouraged, but are not required, to adopt the fair value method of
accounting for employee stock-based transactions. The Company accounts for
such transactions under Accounting Principles Board Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, but discloses pro forma net loss
as if the Company had applied the SFAS No. 123 method of accounting.
Pro forma information, assuming the Company had accounted for its employee
stock options granted under the fair value method prescribed by SFAS No.
123, as amended by Financial Accounting Standards Board Statement No. 148,
"Accounting for Stock Based Compensation - Transition and Disclosure, an
Amendment of FASB Statement No. 123" is presented below. The fair value of
each option grant is estimated on the date of each grant using the
Black-Scholes option-pricing model. There were no stock options granted in
fiscal 2002, 2001 and 2000. The fair value generated by the Black-Scholes
model may not be indicative of the future benefit, if any, that may be
received by the option holder.
F-7
2002 2001 2000
------- ------- -------
Net loss:
As reported ($9,035) ($2,319) ($8,333)
Stock option expense using intrinsic
value method
Stock option expense using fair value method ($ 181) ($ 188) ($ 559)
Pro forma ($9,216) ($2,507) ($8,892)
Net loss per share basic and diluted as reported ($.58) ($.15) ($.52)
Net loss per share basic and diluted pro forma ($.59) ($.16) ($.56)
This pro forma information may not be representative of the amounts to expected
in future years as the fair value method of accounting prescribed by SFAS No.
123 has not been applied to options granted prior to fiscal 1996.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "Business Combinations" ("SFAS 141") and Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS
142"). SFAS 141 eliminates the pooling-of-interests method of accounting for
business combinations initiated after June 30, 2001 and modifies the application
of the purchase accounting method effective for transactions that are completed
after June 30, 2001. SFAS 142 eliminates the requirement to amortize goodwill
and intangible assets having indefinite useful lives but requires that at least
annually for impairment. Intangible assets that have finite lives will continue
to be amortized over their useful lives. The adoption of SFAS 141 and 142 did
not have a material effect on the Company's financial position or operations.
In October 2001, the FASB issued Statement of Financial Accounting
Standards 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"). SFAS No. 144 addresses the accounting and reporting for the
impairment or disposal of long-lived assets. The statement provides a single
accounting model for long-lived assets to be disposed of. New criteria must be
met to classify the asset as an asset held-for-sale. This statement also focuses
on reporting the effects of a disposal of a segment of business. This statement
is effective for fiscal years beginning after December 15, 2001. The Company
adopted SFAS 144 as of March 3, 2002, and the adoption did not have a material
impact on the Company's financial position or results of operations.
In April 2002, Statement of Financial Accounting Standards, No. 145,
"Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No.
13, and Technical Corrections" ("SFAS 145") was issued. SFAS 145 rescinds SFAS 4
and 64, which required gains and losses from extinguishment of debt to be
classified as extraordinary items. SFAS also rescinds SFAS 44 since the
provisions of the Motor Carrier Act of 1980 are complete. SFAS 145 also amends
SFAS 13 eliminating inconsistencies in certain sale-leaseback transactions. The
provisions of SFAS 145 are effective for fiscal years beginning after May 15,
2002. Any gain or loss on extinguishment of debt that was classified as an
extraordinary item in prior periods presented shall be reclassified to interest
expense. The Company does not expect that the adoption of SFAS 145 will have a
material effect on the Company's financial position or results of operations.
F-8
Statement of Financial Accounting Standards, No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"), was issued in July
2002. SFAS 146 requires companies to recognize costs associated with exit or
disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. SFAS 146 supercedes EITF Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (Including Certain Costs Incurred in a Restructuring)." SFAS
146 is to be applied prospectively to exit or disposal activities initiated
after December 31, 2002. This pronouncement did not have a material effect on
the Company's financial position or results of operations.
On December 31, 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, "Accounting for Stock-Based Compensation -Transition and
Disclosure" ("SFAS 148"). This standard amends SFAS No. 123, to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, SFAS
148 amends the disclosure requirements of SFAS 123 to require more frequent and
prominent disclosures in financial statements of the effects of stock-based
compensation. The transition guidance and annual disclosure provisions of SFAS
148 are effective for fiscal years ending after December 15, 2002. The interim
disclosure provisions are effective for financial reports containing financial
statements for interim periods beginning after December 15, 2002. The Company
has adopted the disclosure provisions of SFAS 148 as of March 1, 2003, as
required.
In November 2002, the Financial Accounting Standards Board ("FASB") issued
Interpretation Interpretation No. 45," Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others ("FIN 45"). FIN 45 requires the recognition of a liability for certain
guarantee obligations issued or modified after December 31, 2002. It also
clarifies disclosure requirements to be made by a guarantor for certain
guarantees. The disclosure provisions of FIN 45 are effective for fiscal years
ending after December 15, 2002. FIN 45 is not expected to have a material impact
on the Company's results of operations, financial position or cash flows, and
the Company has adopted the disclosure provisions of FIN 45 as of March 1, 2003.
On January 17, 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities" ("FIN 46"). FIN 46 requires certain variable
interest entities to be consolidated by the primary beneficiary of the entity if
the equity investors in the entity do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 is effective for all new variable interest
entities created or acquired after January 31, 2003. For variable interest
entities created or acquired prior to February 1, 2003, the provisions of FIN 46
must be applied for the first interim or annual period beginning after June 15,
2003. The adoption of FIN 46 did not have an impact on the Company's results of
operations, financial position or cash flows.
In February 2003, the Emerging Issues Task Force ("EITF") addressed EITF
Statement No. 02-16 ("EITF 02-16"), "Accounting by a Reseller for Cash
Consideration Received From a Vendor." EITF 02-16 provides accounting guidance
on how a reseller should characterize consideration given by a vendor and when
to recognize and how to measure that consideration in its income statement. EITF
02-16 is effective for all agreements entered into after December 31, 2002. We
have evaluated the provisions of EITF 02-16 and determined that this statement
did not have a material effect on our consolidated financial statements.
F-9
In April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" ("SFAS 149"). SFAS 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
133. The new guidance amends SFAS 133 for decisions made: (a) as part of the
Derivatives Implementation Group process that effectively required amendments to
SFAS 133, (b) in connection with other Board projects dealing with financial
instruments, and (c) regarding implementation issues raised in relation to the
application of the definition of a derivative, particularly regarding the
meaning of an "underlying" and the characteristics of a derivative that contains
financing components. The amendments set forth in SFAS 149 improve financial
reporting by requiring that contracts with comparable characteristics be
accounted for similarly. SFAS 149 is generally effective for contracts entered
into or modified after June 30, 2003 (with a few exceptions) and for hedging
relationships designated after June 30, 2003. The guidance is to be applied
prospectively. We do not expect the provisions of SFAS 149 to have a material
impact on our financial position or results of operations.
In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity"
("SFAS 150"). SFAS 150 improves the accounting for certain financial instruments
that, under previous guidance, issuers could account for as equity. The new
Statement requires that those instruments be classified as liabilities in
statements of financial position. We do not expect the provisions of SFAS 150 to
have a material impact on our financial position or results of operations.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of:
MARCH 1, MARCH 2,
2003 2002
-------- --------
(IN THOUSANDS)
Land $ 44,855 $ 44,855
Buildings and building improvements 120,192 119,724
Leasehold and leasehold improvements 34,733 39,713
Machinery and equipment 33,197 31,003
Furniture and fixtures 20,136 20,811
Construction in progress 2,433 2,372
-------- --------
255,547 258,478
Less accumulated depreciation and amortization 120,087 111,292
-------- --------
$135,460 $147,186
======== ========
Included in property and equipment is property that the Company intends to sell
but has determined that a sale is not probable within the next year. Such assets
have a book value of approximately $4,667,349 as of March 1, 2003 and a net book
value of approximately $1,474,249 as of March 2, 2002.
F-10
NOTE 3 - INCOME TAXES
The benefit for income taxes is as follows:
FISCAL YEAR ENDED
-------------------------------
MARCH 1, MARCH 2, MARCH 3,
2003 2002 2001
------- ------- -------
(In thousands)
Current:
Federal $ -- $ (593) $ --
State 429 -- (289)
------- ------- -------
429 (593) (289)
------- ------- -------
Deferred:
Federal (4,081) 318 (4,047)
State (1,154) 35 (992)
------- ------- -------
(5,233) 353 (5,039)
------- ------- -------
$(4,805) $ (240) $(5,328)
======= ======= =======
The following is a reconciliation of income taxes computed at the U.S. Federal
statutory rate to the provision for income taxes:
FISCAL YEAR ENDED
----------------------------------
MARCH 1, MARCH 2, MARCH 3,
2003 2002 2001
------ ------ ------
Statutory Federal income tax rate (35.0%) (35.0%) (35.0%)
State taxes, net of Federal income
tax benefits (5.3%) (0.1%) (8.1%)
Officers' life insurance 5.5% 26.2% 4.1%
Other 0.1% (.5) 0
------ ------ ------
Effective income tax rate (34.7%) (9.4%) (39.0%)
====== ====== ======
F-11
The composition of the Company's deferred tax assets and liabilities is as
follows:
FISCAL YEAR ENDED
-------------------
March 1, March 2,
2003 2002
------- -------
(In thousands)
Deferred tax assets:
Capitalization of inventory costs $ 1,286 $ 1,261
Accounts receivable -- 76
Reserves not currently deductible for tax purposes 4,417 3,384
Net operating losses 6,331 1,918
Depreciation 822 --
Step Rent 649 --
Other 35 2,689
------- -------
Total deferred tax assets 13,540 9,328
Deferred tax liability:
Depreciation method and different estimated lives -- (1)
Other -- (504)
------- -------
Total deferred tax liabilities -- (505)
------- -------
Net $13,540 $ 8,823
======= =======
Current deferred tax asset $ 4,143 $ 6,514
Long term deferred tax asset (net of non-current
deferred tax liability) 9,397 2,309
------- -------
Net $13,540 $ 8,823
======= =======
At March 1, 2003 and March 2, 2002, the Company had federal and state net
operating loss carry forwards resulting in a deferred tax asset of $6,331,000
and $1,918,000 respectively. The federal net operating losses will begin to
expire 2006 through 2023. The state net operating losses will begin to expire in
2006.
Based on management's assessment it is more likely than not that deferred tax
assets will be realized by future taxable income or tax planning strategies.
NOTE 4 - BANK CREDIT FACILITIES
The Company has an unsecured revolving credit agreement with a bank for a line
of credit not to exceed $20,000,000 through July 31, 2003. Interest on
individual advances is payable quarterly at 1/2% per annum below the bank's base
rate, except that at the time of advance, the Company has the option to select
an interest rate based upon one other alternative calculations, with such rate
to be fixed for a period not to exceed 90 days. The average daily unused portion
is subject to a commitment fee of 3/8 of 1% per annum. There were no outstanding
borrowings against this agreement as of March 1, 2003 and March 2, 2002.
The agreement contains financial covenants, with respect to consolidated
tangible net worth, as defined, working capital and maximum capital
expenditures, including dividends (defined to include cash repurchases of
capital stock), as well as other financial ratios. The Company is in compliance
with all covenants as of March 1, 2003.
Total interest charges incurred for the years ended March 1, 2003, March 2, 2002
and March 3, 2001 were $237,000, $302,000 and $319,000, respectively, of which
$14,000 were capitalized in fiscal 2000, in connection with the construction of
new facilities. There was no capitalized interest for fiscal 2002 and 2001.
F-12
In addition, the Company has a separate $10,000,000 credit facility with another
bank available for the issuance of letters of credit for the purchase of
merchandise. This agreement may be canceled at any time by either party. At
March 1, 2003 and at March 2, 2002, the Company had $2,754,872 and $4,564,076,
respectively, in outstanding letters of credit.
NOTE 5 - OTHER INCOME
Other income was recorded by the Company amounting to $1,289,000 during fiscal
2002 as outlined below:
FISCAL 2002 FISCAL 2001
----------- -----------
Insurance recovery from employee theft $ -- $3,000,000
Restitution from the employee relating to the theft 750,000 1,811,000
Insurance recovery on Trinity store loss (9/11) 416,000 --
Gain on stock due demutualization -- 1,058,000
Reversal of closed store lease liability -- 377,000
Walmart penalty on Dallas store purchase 100,000 --
Other 32,000 43,000
---------- ----------
Total $1,298,000 $6,289,000
========== ==========
NOTE 6 - STORE CLOSING COSTS
During the second quarter of fiscal 2002, the Company recorded a store closing
cost of $4,000,000 relating to the closing of its downtown Chicago store which
closed September 14, 2002. This action was taken by the Company to cut losses
being incurred at the store due to construction at the neighboring premises
which will continue over a two to three year period. The Company has estimated
and recorded an additional $4,000,000 in potential closing costs in the fourth
quarter of this fiscal year, which represents management's best estimate of its
potential future liability at this time. As of March 1, 2003, the Company has a
potential rent liability of $11,282,000 for the remainder of the nine-year lease
term.
During the third quarter of fiscal 2002, the Company recorded a store closing
cost of $12.9 million relating to a plan to close five stores, including its
Boston, Massachusetts store (which closed October 29, 2000), and an additional
lease commitment cost associated with a previously closed store. At March 1,
2003 and March 2, 2002, $0 and $683,000 remained accrued respectively related to
this restructuring.
BALANCE BALANCE BALANCE
AT MARCH 1, AT MARCH 2, AT MARCH 3,
CHARGES 2003 2002 2001
------- ----------- ----------- -----------
Store closing costs:
Lease commitments $ 6,033 -- $600 $1,077
Impairment of property
& equipment (non cash) 6,417 -- -- --
Severance and other
employee benefits 160 -- -- 14
Other 325 -- 83 342
Total $12,935 -- $683 $1,433
F-13
NOTE 7 - FAIR VALUE DISCLOSURES
The estimated fair values of financial instruments which are presented herein
have been determined by the Company using available market information and
appropriate valuation methodologies. However, considerable judgment is required
in interpreting market data to develop estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of amounts the Company
could realize in a current market exchange.
The fair value of the Company's cash and cash equivalents, accounts receivable
and accounts payable approximates their carrying values at March 1, 2003 and
March 2, 2002 due to the short-term maturities of these instruments.
NOTE 8 - PENSION AND PROFIT SHARING PLANS
a. PENSION PLAN - The Company has a defined benefit pension plan for all
employees other than those covered under collective bargaining agreements.
The benefits are based on years of service and the employee's highest
average pay during any five consecutive years within the ten-year period
prior to retirement. Pension plan costs are funded annually. Contributions
are intended to provide not only for benefits attributed to service to
date, but also for those expected to be earned in the future.
The following information on the Company's pension plan is provided:
MARCH 1, MARCH 2,
2003 2002
------- -------
(In thousands)
CHANGE IN BENEFIT OBLIGATION:
Net benefit obligation at beginning of year $ 6,792 $ 6,029
Service cost 604 532
Interest cost 470 424
Actuarial loss 245 85
Gross benefits paid (269) (278)
------- -------
Net benefit obligation at end of year $ 7,842 $ 6,792
======= =======
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year $ 5,555 $ 5,814
Employer contributions 402 357
Gross benefits paid (269) (278)
Actual return on plan assets (464) (338)
------- -------
Fair value of plan assets at end of year $ 5,224 $ 5,555
======= =======
Funded status at end of year $(2,618) $(1,237)
Unrecognized net actuarial loss 1,921 737
Unrecognized transition amount -- --
------- -------
Accrued benefit costs $ (697) $ (500)
======= =======
F-14
Pension expenses includes the following components:
FISCAL YEAR ENDED
------------------------------
MARCH 1, MARCH 2, MARCH 3,
2003 2002 2001
----- ----- -----
(IN THOUSANDS)
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost $ 604 $ 532 $ 510
Interest cost 470 424 385
Return on assets 464 338 (29)
Amortization of (gain) loss (939) (877) (504)
----- ----- -----
Net periodic benefit cost $ 599 $ 417 $ 362
===== ===== =====
WEIGHTED-AVERAGE ASSUMPTIONS USED:
Discount rate 6.75% 7.00% 7.25%
Rate of compensation increase 4.50% 4.50% 4.50%
The expected long-term rate of return on plan assets was 8.5% for all
years.
b. PROFIT-SHARING AND 401(K) PLAN - The Company has a profit-sharing plan and
401(k) plan for all employees other than those covered under collective
bargaining agreements. In 1995, the Company established a defined
contribution savings plan 401(k) for substantially all of its eligible
employees. Employees may contribute a percentage of their salary to the
plan subject to statutory limits. The Company has not made any matching
contributions to this plan during the fiscal years ended March 1, 2003,
March 2, 2002 and March 3, 2001.
NOTE 9 - COMMITMENTS
a. LEASES - The Company has various operating leases for its retail stores,
with terms expiring between 2002 and 2011. Under most lease agreements, the
Company pays real estate taxes, maintenance and other operating expenses.
Certain store leases also provide for additional contingent rentals based
upon a percentage of sales in excess of certain minimum amounts.
Future minimum lease payments at March 1, 2003 are as follows:
OPERATING
LEASES
-----------
2003 7,861,892
2004 8,000,933
2005 7,705,827
2006 6,549,859
2007 6,291,539
2008 and thereafter 22,001,750
-----------
Total minimum payments $58,411,800
===========
F-15
Rent expense for operating leases are as follows:
FISCAL YEAR ENDED
---------------------------------
March 1, March 2, March 3,
2003 2002 2001
------- -------- --------
(IN THOUSANDS)
Minimum rentals due $ 8,656 $ 9,341 $ 11,131
Escalation rentals accrued 67 324 516
Contingent rentals 9 (20) 15
Sublease rentals (228) (360) (528)
------- -------- --------
$ 8,504 $ 9,285 $ 11,134
======= ======== ========
b. EMPLOYMENT AGREEMENT - The Company has an employment agreement with its
General Merchandising Manager, expiring 2009, pursuant to which annual
compensation of approximately $400,000 is required. In addition, that
employee is entitled to additional compensation upon occurrence of certain
events.
c. LEGAL PROCEEDINGS - The Company is a party to routine litigation incident
to its business. Management of the Company believes, based upon its
assessment of the actions and claims outstanding against the Company, and
after discussion with counsel, that there are no legal proceedings that
will have a material adverse effect on the financial condition or results
of operations of the Company. Some of the lawsuits to which the Company is
a party are covered by insurance and are being defended by the Company's
insurance carriers.
d. GUARANTEES - The Company does not have any guarantees as of March 1, 2003.
NOTE 10 - PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of preferred stock, in
one or more series of preferred stock. The Board of Directors is authorized to
establish the number of shares to be included in each such series, and to fix
the designation, relative rights, preferences, qualifications and limitations of
the shares of each such series.
NOTE 11 - STOCK OPTION PLAN
The Company's Stock Option Plan allows for the granting of incentive stock
options, as defined in Section 422A of the Internal Revenue Code of 1986 (as
amended), non-qualified stock options or stock appreciation rights. The plan
requires that incentive stock options be granted at an exercise price not less
than the fair market value of the common shares on the date the option is
granted. The exercise price of the option for holders of more than 10% of the
voting rights of the Company must be not less than 110% of the fair market value
of the common shares on the date of grant. Non-qualified options and stock
appreciation rights may be granted at any exercise price. The Company has
reserved 1,500,000 shares of common stock for issuance thereunder.
F-16
No option or stock appreciation rights may be granted under the Stock Option
Plan after July 2003. The maximum exercise period for any option or stock
appreciation right under the plan is ten years from the date the option is
granted (five years for any optionee who holds more than 10% of the voting
rights of the Company). The Board of Directors of the Company has approved a
submission to shareholders for approval of an amendment extending the term of
the Stock Option Plan for another ten years.
Stock option transactions are summarized below:
FISCAL YEAR ENDED
-------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
-------------------------------------------------------
MARCH 1, 2003 MARCH 2, 2002 MARCH 3, 2001
----------------- ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED
FISCAL AVERAGE FISCAL AVERAGE FISCAL AVERAGE
2002 EXERCISE 2001 EXERCISE 2000 EXERCISE
FIXED OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE
------ ------ ------ ------ ------ -------
Outstanding
beginning of year 1,060 $ 7.24 1,106 $ 7.24 1,184 $ 7.73
Granted -- -- -- -- -- --
Exercised (15) 5.63 (1) 5.62 -- --
Cancelled (54) 8.07 (45) 5.63 (78) 8.64
- --------------------------------------------------------------------------------
Outstanding, end
of period 991 $ 7.21 1,060 $ 7.24 1,106 $ 7.24
================================================================================
Options exerciseable
at year end 868 $ 7.44 786 $ 7.76 672 $ 8.19
The following table summarizes information about stock options outstanding at
March 1, 2003:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------------- -------------------
WEIGHTED-AVERAGE
NUMBER REMAINING NUMBER
RANGE OF OUTSTANDING AT CONTRACTURAL EXERCISABLE AT
EXERCISE PRICES MARCH 1, 2003 LIFE (YEARS) MARCH 1, 2003
- ---------------------------------------------------------- -------------------
5.625 617,900 6.7 494,320
8.00 87,500 3.6 87,500
8.50 5,100 1.1 5,100
9.75 50,000 0.3 50,000
9.88 25,000 4.2 25,000
10.625 5,650 0.1 5,650
10.6875 200,000 5.6 200,000
------- -------------------
991,150 867,570
F-17
NOTE 12 - NET INCOME PER SHARE
In accordance with SFAS 128, basic net income (loss) per share has been computed
based upon the weighted average common shares outstanding. Diluted net income
per share gives effect to outstanding stock options.
Net income per share have been computed as follows:
FISCAL 2002 FISCAL 2001 FISCAL 2000
----------- ----------- -----------
BASIC NET LOSS PER SHARE:
Net loss ($ 9,035) ($ 2,319) ($ 8,333)
Average shares outstanding 15,661 15,741 15,950
Basic net loss per share ($ 0.58) ($ 0.15) ($ 0.52)
DILUTED NET LOSS PER SHARE:
Net loss ($ 9,035) ($ 2,319) ($ 8,333)
Average shares outstanding 15,661 15,741 15,950
Stock options 0 0 0
-------- -------- --------
Total average equivalent shares 15,661 15,741 15,950
Diluted net loss per share ($ 0.58) ($ 0.15) ($ 0.52)
Options to purchase 991,000, 1,060,000 and 1,106,000 shares of common stock at
prices ranging from $5.625 to $10.6875 per share were outstanding in 2002, 2001
and 2000, respectively, but were not included in the computation of diluted net
loss per share because the exercise price of the options exceed the average
market price and would have been antidilutive.
NOTE 13 - RELATED PARTY TRANSACTIONS
Included in the Statements of Operations are the expenses relating to a real
estate lease with Sy Syms, Chairman of the Board of the Company, for the
Elmsford, New York store, which lease expired November 30, 1999 and which
property was occupied by the Company on a month-to-month basis through November
30, 2002. During fiscal years 2002, 2001 and 2000, the Company paid to Sy Syms
$649,125 and $600,000, respectively, in fixed rent. The Company and Mr. Syms
signed a lease agreement dated December 1,2002 through November 30, 2010 for
annual rent of $796,500.
In fiscal 2002, the Marcy Syms Revocable Trust paid in full a note to the
Company in the amount of $800,000.
F-18
On January 10, 2002, an independent audit committee of the Board of Directors
was established to review the potential acquisition of Stanley Blacker, Inc. a
corporation owned by the Sy Syms Revocable Living Trust. This committee obtained
an independent appraisal as to the fair market value of the business enterprise
of Stanley Blacker, Inc. and on April 18, 2002, the Board of Directors approved
the acquisition based on the independent committee's recommendation to acquire
the assets of Stanley Blacker, Inc. The assets of Stanley Blacker, Inc.
consisted substantially of deferred tax assets, trademarks and trade names
licensed to third party manufacturers of clothing and accessories. Based on the
purchase price allocation, no value was given to the trademarks and trade names.
The acquisition of such assets was consummated on May 1, 2002, for a purchase
price consisting of $250,000 paid in cash, $250,000 paid by the issuance of
44,138 shares of the Company's Common Stock and the balance by the taking of the
assets subject to a note payable to Fleet National Bank in the principal amount
of $1,655,000 together with interest thereon of approximately $11,355, which
note was paid in full by the Company. The Company's financial statements include
the results of operations of Stanley Blacker, Inc. from the date of acquisition.
Purchase Price:
Cash $1,905,000
Stock 250,000
Purchase price 2,155,000
Preliminary Allocation of Purchase Price:
Receivables $ 104,000
Deferred Tax Assets 2,083,000
Payables 32,000
The impact on earnings from the Stanley Blacker, Inc. acquisition for fiscal
years 2002, 2001 and 2000 was not material.
NOTE 14 - UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
QUARTER
---------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED MARCH 1, 2003
Net sales $ 67,950 $ 65,058 $73,271 $ 75,226
Gross profit 29,097 22,979 30,149 26,243
Net income (loss) 707 (6,169) 753 (4,326)
Net income (loss) per share - basic 0.04 (0.39) 0.05 (0.28)
Net income (loss) per share - diluted 0.04 (0.39) 0.05 (0.28)
QUARTER
---------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED MARCH 2, 2002
Net sales $ 71,554 $ 65,319 $75,043 $ 75,828
Gross profit 29,470 22,474 29,819 26,818
Net income (loss) (777) (2,077) 425 110
Net income (loss) per share - basic (0.05) (0.13) 0.03 0.01
Net income (loss) per share - diluted (0.05) (0.13) 0.03 0.01
F-19