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UNITED STATES
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 FEBRUARY 28, 2004
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 $49,502,211 based upon the
closing market price of $6.89 per share of the Common Stock on the New York
Stock Exchange as of August 29, 2003, the last business day of the registrant's
most recently completed second fiscal quarter.
As of May 3, 2004, 15,104,653 shares of Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's Proxy Statement for the 2004 Annual Meeting of
Shareholders are incorporated by reference into Part III of this Annual Report.
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PART I
ITEM 1. BUSINESS
GENERAL
Syms Corp operates a chain of 40 "off-price" retail stores located
throughout the United States in the Northeastern and Middle Atlantic regions and
in the Midwest, Southeast and Southwest. Each Syms store offers a broad range of
first quality, in-season merchandise bearing nationally recognized designer or
brand-name labels 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. Please refer to Note 1 of the
Consolidated Financial Statements for information on segment reporting.
MERCHANDISE
For the year ended February 28, 2004, net sales were generated by the
following categories:
Men's tailored clothes and haberdashery ............. 52%
Women's dresses, suits, separates and accessories ... 30%
Shoes ............................................... 8%
Children's wear ..................................... 3%
---
Luggage, domestics and fragrances ................... 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 272 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 4.0 % 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 February 28, 2004, the Company had 1,837 employees of whom approximately
659 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 27, 2006 and covers 134 sales and
tailor employees. The Company's collective bargaining agreements with Local 1102
of the Retail, Wholesale and Department Store Union and the United Food and
Commercial Workers Union expire on March 31, 2006 and April 30, 2006,
respectively, which together cover sales and tailor employees. The Company
believes its relationships with the unions are good.
2
ITEM 2. PROPERTIES
THE STORES
LOCATION
At February 28, 2004, 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
STATE LOCATION OWNED SPACE
----- -------- ------- -------
CONNECTICUT
Fairfield Owned 32,000
Hartford Leased 31,000
FLORIDA
Fort Lauderdale Owned 44,000
Miami Owned 45,000
West Palm Beach Owned 36,000
Tampa Owned 38,000
Kendall Leased 32,000
GEORGIA
Norcross Owned 51,000
Marietta Owned 39,000
ILLINOIS
Addison Owned 47,000
Niles Leased 32,000
MARYLAND
Baltimore Leased 43,000
Rockville Owned 61,000
Towson Leased 41,000
MASSACHUSETTS
Norwood Leased 36,000
Peabody Leased 39,000
MICHIGAN
Southfield Owned 46,000
Troy Leased 37,000
MISSOURI
St. Louis Leased 33,000
NEW YORK/NEW JERSEY
Park Avenue Leased 45,000
Trinity Owned 40,000
Westbury Owned 72,000
Commack Owned 36,000
Westchester Leased 50,000
Rochester Owned 32,000
Buffalo Owned 39,000
Paramus Owned 56,000
Woodbridge Leased 32,000
Secaucus Owned 29,000
Cherry Hill Owned 40,000
Lawrenceville Leased 54,000
NORTH CAROLINA
Charlotte Leased 30,000
OHIO
Highland Heights Leased 36,000
PENNSYLVANIA
King of Prussia Owned 41,000
Monroeville Owned 31,000
RHODE ISLAND
N. Cranston Leased 27,000
TEXAS
Dallas Owned 42,000
Houston Owned 34,000
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 pursuant to an agreement entered into as of
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 which the Company
has agreed to sell pursuant to an agreement entered into in March 2004. The
closings on these properties have not been consumated.
LEASE TERMS
Sixteen 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)
------- --------- --------------- ------------------
2004 2 1 10 years
2005 4 3 5 years
2006 1 1 3-5 years
2007 1 0 0
2008 2 1 5 years
2009 and thereafter 7 6 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. Two of the Company's stores provide for rent based on a percentage of
sales. Minimum rental payments for Syms' leased stores aggregated $8,064,503 for
the year ended February 28, 2004, of which $796,500 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.
STORE OPENINGS/CLOSINGS
No new stores were opened this year, and no stores were closed.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine litigation incident to its business.
Management of the Company believes, based upon its assessment of the actions and
claims outstanding against the Company, and after discussion with counsel, that
there are no legal proceedings that will have a material adverse effect on the
financial condition or results of operations of the Company. Some of the
lawsuits to which the Company is a party are covered by insurance and are being
defended by the Company's insurance carriers.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this Annual Report.
4
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
The common stock of the Company (the "Common Stock") is listed for trading
on the New York 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 February 28, 2004 $8.08 $6.75
Quarter ended November 29, 2003 7.12 6.41
Quarter ended August 30, 2003 7.06 6.38
Quarter ended May 31, 2003 8.17 6.95
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
HOLDERS
As of May 3, 2004, there were 122 record holders of the Company's Common
Stock.
DIVIDENDS
The Board of Directors of the Company did not declare dividends in the
fiscal years ended February 28, 2004 and March 1, 2003. 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.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER
- -------------------- ----------- ---------- ------------------ -----------------
(c) TOTAL NUMBER (d) MAXIMUM
(b) OF SHARES NUMBER OF SHARES
(a) TOTAL AVERAGE PURCHASED AS THAT MAY YET BE
NUMBER OF PRICE PART OF PUBLICLY PURCHASED UNDER
SHARES PAID PER ANNOUNCED PLANS THE PLANS OR
PERIOD PURCHASED SHARE OR PROGRAMS PROGRAMS(1)
- -------------------- ----------- ---------- ------------------ -----------------
NOVEMBER 30, 2003 -
JANUARY 3, 2004 0 0 0 0
- -------------------- ----------- ---------- ------------------ -----------------
JANUARY 4, 2004 -
JANUARY 31, 2004 0 0 0 0
- -------------------- ----------- ---------- ------------------ -----------------
FEBRUARY 1, 2004 -
FEBRUARY 28, 2004 50,000 $6.98 50,000 2,472,700
- -------------------- ----------- ---------- ------------------ -----------------
TOTAL 50,000 $6.98 50,000 2,472,700
- -------------------- ----------- ---------- ------------------ -----------------
5
(1) On June 7, 2002, the Company's Board of Directors' authorized the
repurchase of up to 20% of its outstanding shares of common stock (not to
exceed 3,200,000 shares) at prevailing market prices through June 7, 2004.
For equity compensation plan information, see Item 12.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below has been derived from the
Company's audited Consolidated Financial Statements for the fiscal years ended
February 28, 2004, March 1, 2003, March 2, 2002, March 3, 2001 and February 26,
2000. The selected financial data presented below should be read in conjunction
with such Financial Statements and notes thereto.
FISCAL YEAR ENDED
----------------------------------------------------------------------------
FEBRUARY 28, MARCH 1, MARCH 2, MARCH 3, FEBRUARY 26,
2004 2003 2002 2001 2000
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA:
Net sales .................................. $ 275,219 $ 281,505 $ 287,744 $ 342,316 $ 341,570
Net income (loss) .......................... (4,668) (9,035) (2,319) (8,333) 2,224
Net income (loss) per share - basic ........ (0. 31) (0.58) (0.15) (0.52) 0.14
Net income (loss) per share - diluted ...... (0.31) (0.58) (0.15) (0.52) 0.14
BALANCE SHEET DATA:
Working capital ............................ $ 71,710 $ 77,342 $ 85,961 $ 86,638 $ 87,812
Total assets ............................... 253,738 262,473 276,494 276,867 300,314
Other long term liabilities ................ 1,862 1,891 2,118 2,409 2,436
Shareholders' equity ....................... 223,174 230,153 241,457 243,935 253,428
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report (including but not limited to factors discussed below,
in the "Management's Discussion and Analysis of Financial Condition and Results
of Operations," as well as those discussed elsewhere in this Annual Report on
Form 10-K) may include certain forward-looking statements (within the meaning of
Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange
Act of 1934) and information relating to the Company that are based on the
beliefs of the management of the Company as well as assumptions made by and
information currently available to the management of the Company. When used in
this Annual Report, the words "anticipate," "believe," "estimate," "expect,"
"intend," "plan," and similar expressions, as they relate to the Company or the
management of the Company, identify forward-looking statements. Such statements
reflect the current views of the Company with respect to future events, the
outcome of which is subject to certain risks, including among others 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.
EXECUTIVE OVERVIEW
Syms is an off-price retailer which operates a chain of forty apparel
stores located throughout the Northeastern and middle Atlantic regions, the
Midwest, Southeast and Southwest. Syms stores offer a broad range of first
quality, in-season merchandise bearing nationally recognized designer and
brand-name labels in men's, women's and children's apparel.
The retail environment continues to be challenging, although the Company
experienced an improved performance in the third and fourth quarters of fiscal
2003. The uncertainty of economic conditions continues to make the forecasting
of near-term results difficult; however, the Company believes that current
economic indicators suggest that the Company may achieve improved performance in
fiscal 2004 compared to fiscal 2003 levels. This improvement may include
moderate comparable store sales growth accompanied by slight improvement in
gross margin rate, coupled with continued focus on attaining further expense
efficiencies.
6
During the difficult past few years, the Company has lowered its expenses
and inventories enabling it to maintain a strong cash position and to remain
debt free. In fiscal 2004, the Company will continue to focus on strong
inventory and expense management which will allow it to maintain its strong cash
position and minimize its debt.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
appropriate application of certain accounting policies, many of which require us
to make estimates and assumptions about future events and their impact on
amounts reported in the financial statements and related notes. Since future
events and their impact cannot be determined with certainty, the actual results
will inevitably differ from 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 ASSETS - In evaluation of the fair value and future benefits of
long-lived assets, the Company performs an analysis 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.
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 February 28, 2004,
March 1, 2003 and March 2, 2002. The fiscal years ended February 28, 2004, March
1, 2003 and March 2, 2002 were each comprised of 52 weeks.
7
FISCAL YEAR ENDED FEBRUARY 28, 2004 (FISCAL 2003) COMPARED TO FISCAL YEAR
ENDED MARCH 1, 2003 (FISCAL 2002)
Net sales for the fiscal year ended February 28, 2004 were $275,219,000, a
decrease of $6,286,000 (2.2%) as compared to net sales of $281,505,000 for the
fiscal year ended March 1, 2003. The decline in sales for fiscal 2003 is largely
attributable to the two closed stores amounting to approximately $4,344,000,
located in Chicago, IL and Pittsburgh, PA. Comparable store sales decreased 0.8%
for the fiscal year ended February 28, 2004, as compared to the fiscal year
ended March 1, 2003.
Gross profit for the fiscal year ended February 28, 2004 was $107,751,000,
a decrease of $717,000 (39.2% as a percentage of net sales) as compared to
$108,468,000 (38.5% as a percentage of net sales) for the fiscal year ended
March 1, 2003. Although the gross profit percentage of net sales improved in
fiscal 2003 due to lower markdowns, the decline in net sales, as noted above,
accounts for the shortfall in gross profit dollars.
Selling, general and administrative (SG&A) expense was $76,304,000 (27.7%
as a percentage of net sales) for the fiscal year ended February 28, 2004 as
compared to $76,998,000 (27.4% as a percentage of net sales) for the fiscal year
ended March 1, 2003. The decline in expenses for fiscal 2003 is largely
attributable to the closing of two stores located in Chicago, IL and Pittsburgh,
PA which was partially offset by an increase in union benefits, pension and
maintenance and repairs.
Advertising expense for the fiscal year ended February 28, 2004 was
$8,409,000 (3.1% as a percentage of net sales) as compared to $10,126,000 (3.6%
as a percentage of net sales) for the fiscal year ended March 1, 2003. The
decrease in advertising expense is largely attributable to the cancellation of
certain print media advertising in the fourth quarter of this fiscal year.
Occupancy costs were $17,418,000 (6.3% as a percentage of net sales) for
the fiscal year ended February 28, 2004 as compared to $17,702,000 (6.3% as a
percentage of net sales) for the fiscal year ended March 1, 2003. This decline
is attributable primarily to the closing of the Pittsburgh, PA and Chicago, IL
stores which was partially offset by an increase in occupancy costs of existing
stores.
Depreciation and amortization expense amounted to $10,896,000 (4.0% as a
percentage of net sales) for the fiscal year ended February 28, 2004 as compared
to $10,908,000 (3.9% as a percentage of net sales) for the fiscal year ended
March 1, 2003.
During fiscal 2002, the Company recorded a store closing cost of $8,000,000
relating to the closing on September 14, 2002 of its downtown Chicago store.
This action was taken by the Company to cut losses being incurred at the store
because ongoing construction at or near the premises, expected to continue for
several years, rendered the store "unusable" for a retailer. The Company had a
potential rent liability of $11,282,000 for the remainder of the nine-year lease
term and the landlord had commenced an action relating to the rents liability
which the Company was defending. The Company reached a settlement with the
landlord in January 2004 resulting in the Company recording an additional
$500,000 in closing costs which were charged to the fourth quarter of fiscal
2003 which ended on February 28, 2004.
Net loss before income taxes was $5,433,000 for the fiscal year ended
February 28, 2004 as compared to a net loss of $13,840,000 for the fiscal year
ended March 1, 2003. This variance is primarily attributable to the recording of
store closing costs of $8,000,000 in fiscal 2002.
For the fiscal year ended February 28, 2004, the effective income tax rate
was 13.7% as compared to 34.7% for the fiscal year ended March 1, 2003. The
fluctuation on the effective income tax rate is due primarily to the recording
of the valuation allowance, prior period adjustments and non-deductibility
officer's life insurance premiums.
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
8
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 as 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 occupancy costs of
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
========== ==========
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 fiscal
2002. 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 fiscal
2002, 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.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at February 28, 2004 was $76,205,000, a decrease of
$1,137,000 from March 1, 2003, and the ratio of current assets to current
liabilities was 3.66 to 1 as compared to 3.54 to 1 at March 1, 2003. The
Company's continued efforts to reduce inventory levels and, in addition to
expenditures for treasury stock partially offset by a reclassification to
current assets for fixed assets to be sold in the next fiscal year, contributed
to the decline in working capital.
Net cash provided by operating activities totaled $6,806,000 for fiscal
2003 as compared to $7,251,000 for fiscal 2002.
Net cash used in investing activities was $2,326,000 for fiscal 2003 as
compared to $5,021,000 for fiscal 2002. Purchases of property and equipment
totaled $2,392,000 and $3,116,000 for fiscal years 2003 and 2002, respectively.
This variance is primarily attributable to the purchase during fiscal 2002 of
the assets of Stanley Blacker, Inc. for $1,905,000.
9
Net cash used in financing activities was $2,291,000 for the fiscal year
ended February 28, 2004 as compared to $2,518,000 for the fiscal year ended
March 1, 2003. This amount represents the purchase of the Company's stock in
fiscal years 2003 and 2002.
On November 5, 2003, the Company entered into a revolving credit agreement
with a bank for a line of credit not to exceed $20,000,000 through April 30,
2005. 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
February 28, 2004 and March 1, 2003, there were no borrowings under the
revolving credit agreement. At February 28, 2004 and at March 1, 2003, the
Company had $2,597,266 and $2,754,872, respectively, in outstanding letters of
credit. The outstanding letters of credit for the period ended February 28, 2004
are part of the unsecured $20,000,000 line of credit.
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 cancelled at any time by either party. The
Company is not utilizing this facility.
The Company has planned capital expenditures of approximately $5,000,000
for the fiscal year ending February 26, 2005.
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 February 28, 2004, the Company purchased
366,300 shares which represented 2.4% of its outstanding shares at a total cost
of $2,438,000.
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 2004.
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.
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
------------------ ---------------- ----------------- ----------------- -----------------
Less than More than
Total 1 year 1-3 years 3-5 years 5 years
------------------ ---------------- ----------------- ----------------- -----------------
CONTRACTUAL OBLIGATIONS
Employment Agreements $ 2,150,000 $ 400,000 $ 850,000 $ 900,000 $ --
------------------ ---------------- ----------------- ----------------- -----------------
Operating Leases 41,878,612 7,825,472 12,845,621 11,702,131 9,505,388
------------------ ---------------- ----------------- ----------------- -----------------
Total Contractual Cash
Obligations $44,028,612 $8,225,472 $13,695,621 $12,602,131 $ 9,505,388
------------------ ---------------- ----------------- ----------------- -----------------
================== ================ ================= ================= =================
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 2,597,266 2,597,266
------------------ ---------------- ----------------- ----------------- -----------------
Total Commercial Commitments $2,597,266 $2,597,266 -- -- --
================== ================ ================= ================= =================
OFF BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements (as defined in Item 303
of Regulation S-K).
10
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 of the Consolidated Financial Statements for a full description
of the Recent Accounting Pronouncements including the respective dates of
adoption and the effects on Results of Operation and Financial Condition.
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 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 0.5 of 1% per annum.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our financial statements and supplementary data required by this Item are
provided in the financial statements of the Company included in this Annual
Report on Form 10-K as listed in Item 15(a) of the Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures - Based on the evaluation of the
Company's disclosure controls and procedures as of the end of the period covered
by 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 and 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.
Notwithstanding the foregoing, a control system, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance that it will
detect or uncover failures within the Company to disclose material information
otherwise required to be set forth in the Company's periodic reports.
Internal Control Over Financial Reporting - There have not been any changes
in the Company's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
Company's most recently completed fiscal quarter that have materially affected,
or are reasonably likely to materially affect the Company's internal control
over financial reporting.
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) .................... 78 Chairman of the Board and
Director of the Company
Marcy Syms (1)(2) ................. 53 Chief Executive Officer / President
and Director of the Company
Antone F. Moreira ................. 67 Vice President, Chief Financial
Officer, Treasurer,
Assistant Secretary and
Director of the Company
Harvey A. Weinberg (3)(4) ......... 66 Director of the Company
David A. Messer (3)(4)............. 42 Director of the Company
Wilbur L. Ross, Jr (3) (4)......... 66 Director of the Company
11
NAME AGE TITLE
---- --- -----
Ronald Zindman..................... 54 Executive Vice President -
General Merchandise Manager
Allen Brailsford................... 60 Executive Vice President - Operations
Myra Butensky...................... 45 Vice President - Divisional Merchandise
Manager Men's Tailored Clothing
James Donato....................... 48 Vice President - Operations
Elyse Marks........................ 51 Vice President - MIS
John Tyzbir........................ 50 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.
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.
12
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.
In accordance with General Instruction G(3) of the General Instructions to Form
10-K, the other information called for by Item 10 is omitted from this Annual
Report and is incorporated by reference to the definitive Proxy Statement to be
filed by the Company pursuant to Regulation 14A of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, which the
Company will file not later than 120 days after February 28, 2004, the end of
the fiscal year covered by this Annual Report.
ITEM 11. EXECUTIVE COMPENSATION
In accordance with General Instruction G(3) of the General Instructions to
Form 10-K, the information called for by Item 11 is omitted from this Annual
Report and is incorporated by reference to the definitive Proxy Statement to be
filed by the Company pursuant to Regulation 14A of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, which the
Company will file not later than 120 days after February 28, 2004, the end of
the fiscal year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth equity compensation plan information as of
February 28, 2004:
- -------------------------- -----------------------------------------------------
EQUITY COMPENSATION PLAN INFORMATION
- -------------------------- -----------------------------------------------------
Number of Number of
securities securities
to be remaining available
issued upon Weighted-average for future issuance
exercise of exercise price under equity
outstanding of outstanding compensation plans
options, options (excluding
warrants warrants securities reflected
Plan Category and rights and rights in column (a))
- ------------- ------------- ------------------ ----------------------
(a) (b) (c)
- ---------------------- ------------- ------------------ ----------------------
Equity compensation
plans approved by
security holders..... 887,650 $7.13 336,260
- ---------------------- ------------- ------------------ ----------------------
Equity compensation
plans not approved by
security holders...... N/A N/A N/A
- ---------------------- ------------- ------------------ ----------------------
Total................. 887,650 $7.13 336,260
- ---------------------- ------------- ------------------ ----------------------
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 February 28, 2004, the end of
the fiscal year covered by this Annual Report.
13
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. PRINCIPAL ACCOUNTANT FEES AND SERVICES
In accordance with General Instruction G(3) of the General Instructions to
Form 10-K, the information called for by Item 14 is omitted from this Annual
Report and is incorporated by reference to the definitive Proxy Statement to be
filed by the Company pursuant to Regulation 14A of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, which the
Company will file not later than 120 days after February 28, 2004, the end of
the fiscal year covered by this Annual Report.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
PAGE NUMBER
(a)(1) Financial Statements:
Report of Independent Certified Public Accountants, BDO Seidman, LLP........ F-1
Independent Auditors' Report, Deloitte & Touche, LLP........................ F-2
Consolidated Balance Sheets ................................................ F-3
Consolidated Statements of Operations ...................................... F-4
Consolidated Statements of Shareholders' Equity ............................ F-5
Consolidated Statements of Cash Flows ...................................... F-6
Notes to Consolidated Financial Statements ................................. F-7
(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)
14
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)
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)
10.48+ Amendment to Syms Corp Amended and Restated Incentive Stock Option and
Appreciation Plan (10-Q Report for fiscal quarter ended August 30,
2003)
10.49 Seventh Amendment to Revolving Credit Agreement and Second Amendment to
Promissory Note, dated as of July 23, 2003, between Syms Corp and Fleet
National Bank (10-Q Report for fiscal quarter ended August 30, 2003)
10.50 Loan Agreement, dated as of November 5, 2003, between Syms Corp and
Israel Discount Bank of New York (10-Q Report for fiscal quarter ended
November 29, 2003)
21* List of Subsidiaries of the Company
23.1* Consent of BDO Seidman, LLP
23.2* Consent of Deloitte & Touche LLP
31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
under the Securities and Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
under the Securities and Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(b)
under the Securities and Exchange Act of 1934 and 18.U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
32.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(b)
under the Securities and Exchange Act of 1934 and 18.U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
(b) Reports on Form 8-K:
On December 23, 2003, the Company filed a Report on Form 8-K pursuant
to Items 7 and 12 of such Form regarding its results of operations for
the quarter ended November 29, 2003
15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SYMS CORP
By: /s/ Marcy Syms
---------------------
Marcy Syms
Chief Executive Officer / President
Date: May 20, 2004
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 20, 2004
- ------------------------ and Director
Sy Syms
/s/ Marcy Syms Chief Executive Officer/President May 20, 2004
- ------------------------ and Director
Marcy Syms (Principal executive officer)
/s/ Antone F. Moreira Vice President, Chief Financial May 20, 2004
- ------------------------ Officer, Assistant Secretary and
Antone F. Moreira Director (Principal financial
and accounting officer)
/s/ Harvey A. Weinberg Director May 20, 2004
- ------------------------
Harvey A. Weinberg
/s/ David A. Messer Director May 20, 2004
- ------------------------
David A. Messer
/s/ Wilbur L. Ross, Jr. Director May 20, 2004
- ------------------------
Wilbur L. Ross, Jr.
16
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
Syms Corp
Secaucus, New Jersey
We have audited the accompanying consolidated balance sheet of Syms Corp and
subsidiaries as of February 28, 2004 and the related consolidated statements of
operations, shareholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of Syms Corp's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Syms Corp and
subsidiaries as of February 28, 2004 and the results of their operations and
their cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
New York, New York /s/ BDO Seidman, LLP
April 16, 2004 BDO Seidman, LLP
F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Syms Corp
Secaucus, New Jersey
We have audited the accompanying consolidated balance sheet of Syms Corp and
Subsidiaries as of March 1, 2003, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the two 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 the results of their operations and their cash flows for each
of the two years in the period ended March 1, 2003, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
April 24, 2003
F-2
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FEBRUARY 28, MARCH 1,
2004 2003
-------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 21,386 $ 19,197
Merchandise inventories 69,226 78,151
Deferred income taxes 3,627 4,143
Assets held for sale 4,495 --
Prepaid expenses and other current assets 6,173 6,280
-------- --------
Total current assets 104,907 107,771
PROPERTY AND EQUIPMENT - NET 123,757 135,460
DEFERRED INCOME TAXES 11,094 9,397
OTHER ASSETS 13,980 9,845
-------- --------
TOTAL ASSETS $253,738 $262,473
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 16,154 $ 12,639
Accrued expenses 7,714 12,099
Accrued insurance 1,264 2,339
Obligation to customers 3,570 3,352
-------- --------
Total current liabilities 28,702 30,429
OTHER LONG TERM LIABILITIES 1,862 1,891
COMMITMENTS AND CONTINGENCIES
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; 15,092 shares
outstanding as of February 28, 2004 (net
2,879 treasury shares) and 15,435 shares
outstanding as of March 1, 2003
(net of 2,513 treasury shares) 755 772
Additional paid-in capital 14,239 14,093
Treasury stock (23,993) (21,573)
Retained earnings 232,173 236,861
-------- --------
Total shareholders' equity 223,174 230,153
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $253,738 $262,473
======== ========
See Notes to Consolidated Financial Statements
F-3
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEAR ENDED
--------------------------------------
FEBRUARY 28, MARCH 1, MARCH 2,
2004 2003 2002
------------ -------- --------
NET SALES $275,219 $281,505 $287,744
Cost of goods sold 167,468 173,037 179,163
-------- -------- --------
Gross profit 107,751 108,468 108,581
EXPENSES
Selling, general and administrative 76,304 76,998 78,261
Advertising 8,409 10,126 8,936
Occupancy 17,418 17,702 18,807
Depreciation and amortization 10,896 10,908 11,520
Other income (368) (1,298) (6,289)
Special charges 500 8,000 --
-------- -------- --------
Loss from operations (5,408) (13,968) (2,654)
Interest expense (income) net 25 (128) (95)
-------- -------- --------
Loss before income taxes (5,433) (13,840) (2,559)
Benefit for income taxes (745) (4,805) (240)
-------- -------- --------
NET LOSS $ (4,688) $ (9,035) $ (2,319)
======== ======== ========
Net Loss Per Share - basic and diluted $ (0.31) $ (0.58) $ (0.15)
======== ======== ========
Weighted Average Shares Outstanding 15,285 15,661 15,741
======== ======== ========
See Notes to Consolidated Financial Statements
F-4
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
(IN THOUSANDS)
Additional
Common Stock Paid-in Treasury Retained
Shares Amount Capital Stock Earnings Total
------- ----- ------- -------- --------- ---------
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) 236,861 230,153
Exercise of options 23 1 146 0 0 147
Stock buyback (366) (18) -- (2,420) -- (2,438)
Net loss -- -- -- -- (4,688) (4,688)
------- ----- ------- -------- --------- ---------
BALANCE AS OF
FEBRUARY 28, 2004 15,092 $ 755 $14,239 $(23,993) $ 232,173 $ 223,174
======= ===== ======= ======== ========= =========
See Notes to Consolidated Financial Statements
F-5
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
(IN THOUSANDS)
FISCAL YEAR ENDED
---------------------------------
February 28, March 1, March 2,
2004 2003 2002
------------ -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,688) $(9,035) $(2,319)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 10,896 10,908 11,520
Deferred income taxes (1,181) (2,634) 353
Loss (gain) on sale of property and equipment 394 -- (133)
Fixed asset impairment -- 3,933 --
(Increase) decrease in operating assets:
Merchandise inventories 8,925 8,659 12,376
Prepaid expenses and other current assets 107 (105) (1,833)
Other assets (5,891) (1,726) (1,924)
Increase (decrease) in operating liabilities:
Accounts payable 3,515 (5,260) 1,414
Accrued expenses (5,460) 2,449 829
Obligations to customers 218 289 153
Other long term liabilities (29) (227) (291)
------- ------- -------
Net cash provided by operating activities 6,806 7,251 20,145
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Stanley Blacker, Inc. -- (1,905) --
Purchase of property and equipment (2,392) (3,116) (7,990)
Proceeds from sale of property and equipment 66 -- 5
------- ------- -------
Net cash used in investing activities (2,326) (5,021) (7,985)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury shares (2,438) (2,604) (167)
Exercise of options 147 86 7
------- ------- -------
Net cash used in financing activities (2,291) (2,518) (160)
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,189 (288) 12,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 19,197 19,485 7,485
------- ------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $21,386 $19,197 $19,485
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 272 $ 374 $ 299
======= ======= =======
Income taxes paid, net of refunds $ 4,267 $ -- $ 3,127
======= ======= =======
Stanley Blacker, Inc. acquisition financed
through stock issuance $ -- $ 250 $ --
======= ======= =======
See Notes to Consolidated Financial Statements
F-6
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED FEBRUARY 28, 2004, MARCH 1, 2003 AND MARCH 2, 2002
- --------------------------------------------------------------------------------
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 United States
in the Northeastern and Middle Atlantic regions and in the Midwest,
Southeast and Southwest. Each Syms store offers a broad range of first
quality, in-season merchandise bearing nationally recognized designer or
brand-name labels for men, women and children.
b. PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
c. ACCOUNTING PERIOD - The fiscal years ended February 28, 2004, March 1, 2003
and March 2, 2002 were comprised of 52 weeks.
d. CASH AND CASH EQUIVALENTS - Syms Corp considers credit card receivables and
all short-term investments with an original maturity of three months or
less as cash equivalents.
e. MERCHANDISE INVENTORIES - Merchandise inventories are stated at the lower
of cost or market on a first-in first- out (FIFO) basis, as determined by
the retail inventory method.
f. PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation and amortization are principally determined by the
straight-line method over the following estimated useful lives:
Buildings and improvements 15 - 39 years
Machinery and equipment 4 - 7 years
Furniture and fixtures 7 - 10 years
Leasehold improvements Lesser of life of the asset or life of lease
g. IMPAIRMENT OF LONG-LIVED ASSETS - The Company periodically reviews
long-lived assets for impairment whenever changes in the circumstances
indicate that the carrying amount of the assets may not be fully
recoverable. The Company considers relevant cash flow, management's
strategic plans, significant decreases in the market value of the asset and
other available information in assessing whether the carrying value of the
assets can be recovered. When such events occur, the Company compares the
carrying amount of the assets to undiscounted expected future cash flows
from the use and eventual disposition of the asset. If this comparison
indicates an impairment, the carrying amount would then be compared to the
fair value of the long-lived asset. An impairment loss would be measured as
the amount by which the carrying value of the long-lived asset exceeds its
fair value. The difference would be recorded as an impairment of assets.
h. INCOME TAXES - Deferred income taxes reflect the future tax consequences of
differences between the tax bases of assets and liabilities and their
financial reporting amounts at year end.
i. OBLIGATION TO CUSTOMERS - Obligations to customers represent credits issued
for returned merchandise as well as gift certificates.
F-7
j. 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.
k. 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.
l. COMPREHENSIVE INCOME - Comprehensive income is equivalent to the Company's
net income for fiscal years 2003, 2002 and 2001.
m. 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
--------------------
2003 2002 2001
---- ---- ----
Men's tailored clothes and haberdashery 52% 52% 51%
Women's dresses, suits, separates and accessories 30% 30% 31%
Shoes 8% 7% 7%
Children's wear 7% 8% 8%
Luggage, domestics and fragrances 3% 3% 3%
--- --- ---
100% 100% 100%
The Company does not rely on any major customers as a source of revenue.
n. COMPUTER SOFTWARE COSTS - The Company capitalizes the cost of software
developed or purchased for internal use.
o. OTHER ASSETS - Other assets include $13,521,000 and $9,497,000 of cash
surrender value of officer's life insurance, and $459,000 and $349,000 of
other miscellaneous assets such as security deposits, step rent receivables
and deferred lease acquisition costs at February 28, 2004 and March 1,
2003, respectively.
p. ADVERTISING COSTS - Advertising and sales promotion costs are expensed at
the time the advertising occurs. Advertising and sales promotion costs were
$8,409,000, $10,126,000 and $8,936,000 in 2003, 2002 and 2001,
respectively.
q. 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,
F-8
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 2003, 2002 and 2001. 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.
2003 2002 2001
------- ------- -------
Net loss as reported ($4,688) ($9,035) ($2,319)
Less stock option expense using
fair value method ($484) ($181) ($188)
Pro forma net loss ($5,172) ($9,216) ($2,507)
Net loss per share basic and diluted
as reported ($.31) ($.58) ($.15)
Net loss per share basic and diluted
pro forma ($.34) ($.59) ($.16)
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 November 2002, the Financial Accounting Standards Board ("FASB")
issued 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 became effective for fiscal
years ending after December 15, 2002. The adoption of FIN 45 did not effect the
Company's consolidated financial statements.
In January 2003, the FASB issued Interpretation No. 46, Consolidation
of Variable Interest Entities. The objective of this interpretation is to
provide guidance on how to identify a variable interest entity ("VIE") and
determine when the assets, liabilities, non-controlling interests, and results
of operations of a VIE need to be included in a company's consolidated financial
statements. A company that holds variable interests in an entity will need to
consolidate the entity if the company's interest in the VIE is such that the
company will absorb a majority of the VIE's expected losses and/or receive a
majority of the entity's expected residual returns, if they occur.
Interpretation No. 46 also requires additional disclosures by primary
beneficiaries and other significant variable interest holders. In December 2003,
the FASB completed deliberations of proposed modifications to FIN 46 ("Revised
Interpretations") resulting in multiple effective dates based on the nature as
well as the creation date of the VIE. VIE's created after January 31, 2003, but
prior to January 1, 2004, may be accounted for either based on the original
interpretation or the Revised Interpretations. However, the Revised
Interpretations must be applied no later than the Company's first
F-9
quarter of fiscal 2004. VIE's created after January 1, 2004 must be accounted
for under the Revised Interpretations. Special Purpose Entities ("SPE's")
created prior to February 1, 2003 may be accounted for under the original or
revised interpretation's provisions no later than the Company's first quarter of
fiscal 2004. Non-SPE's created prior to February 1, 2003, should be accounted
for under the revised interpretation's provisions no later than the Company's
first quarter of fiscal 2004. The Company has not entered into any material
arrangements with VIE's created after January 31, 2003. The Company is currently
evaluating the effect that the adoption of FIN 46 for VIE's created prior to
February 1, 2003 will have on its results of operations and financial condition.
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. The
Company evaluated the provisions of EITF 02-16 and determined that this
statement did not have a material effect on its consolidated financial
statements.
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. The adoption of the provisions of SFAS 150
did not have a material impact on our financial position or results of
operations.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of:
FEBRUARY 28, MARCH 1,
2004 2003
----------- ---------
(IN THOUSANDS)
Land $ 40,360 $ 44,855
Buildings and building improvements 120,889 120,192
Leasehold and leasehold improvements 34,820 34,733
Machinery and equipment 33,146 33,197
Furniture and fixtures 22,044 20,136
Construction in progress 2,521 2,434
--------- ---------
253,780 255,547
Less accumulated depreciation and amortization 130,023 120,087
--------- ---------
$ 123,757 $ 135,460
========= =========
Included in assets held for sale is property that the Company intends to sell
(property located in Roseland, New Jersey and North Kendall, Ohio). The Company
presently has contracts to sell both properties at amounts in excess of its
carrying value. Such assets have carrying value of approximately $4,494,664 as
of February 28, 2004.
F-10
NOTE 3 - INCOME TAXES
The benefit for income taxes is as follows:
FISCAL YEAR ENDED
--------------------------------------
FEBRUARY 28, MARCH 1, MARCH 2,
2004 2003 2002
----------- ------- -------
(In thousands)
Current:
Federal $ -- $ -- $(593)
State 436 429 --
------- ------- -----
436 429 (593)
------- ------- -----
Deferred:
Federal (279) (4,081) 318
State (902) (1,154) 35
------- ------- -----
(1,181) (5,233) 353
------- ------- -----
$ (745) $(4,805) $(240)
======= ======= =====
The following is a reconciliation of income taxes computed at the U.S. Federal
statutory rate to the provision for income taxes:
FISCAL YEAR ENDED
-------------------------------------
FEBRUARY 28, MARCH 1, MARCH 2,
2004 2003 2002
----------- ------- -------
Statutory Federal income tax rate (35.0%) (35.0%) (35.0%)
State taxes, net of Federal income
tax benefits (5.6%) (5.3%) (0.1%)
Officers' life insurance 9.3% 5.5% 26.2%
Additional deferred tax assets purchased (12.0%) -- --
Other 2.0% 0.1% (.5)
Valuation allowance 27.6% -- --
------ ------ ------
Effective income tax rate (13.7%) (34.7%) (9.4%)
====== ====== ======
F-11
The composition of the Company's deferred tax assets and liabilities is as
follows:
FISCAL YEAR ENDED
-----------------------------
February 28, March 1,
2004 2003
------------- -------------
(In thousands) (In thousands)
Deferred tax assets:
Capitalization of inventory costs $ 1,156 $ 1,286
Accrued pension costs 151 --
Reserves not currently deductible for tax purposes 3,196 4,417
Net operating losses 8,524 6,331
Depreciation 2,525 822
Step Rent 632 649
Other 36 35
-------- -------
Deferred tax assets before valuation allowance 16,220 13,540
Valuation allowance (1,500) --
-------- -------
Net deferred tax assets $ 14,720 $13,540
======== =======
Current deferred tax asset $ 3,627 $ 4,143
Long term deferred tax asset 11,094 9,397
-------- -------
Total $ 14,720 $13,540
======== =======
At February 28, 2004, the Company had federal and state net operating loss carry
forwards of $16,210,397 and $57,009,697, respectively. The Company recorded a
valuation allowance in the amount of $1,500,000 with regard to net operating
loss carry forwards expiring in the next two years. The valuation allowance
relates to in part to additional net operating loss carry forwards identified in
2003 relating to the Stanley Blacker acquisition. The federal net operating
losses expire in years through 2024. 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
On November 5, 2003, the Company entered into an unsecured revolving credit
agreement with a bank for a line of credit not to exceed $20,000,000 through
April 2005. Interest on individual advances is payable quarterly at 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 alternative calculation, with such rate
to be fixed for a period not to exceed 90 days. The average daily unused portion
is subject to a commitment fee of 1/2 of 1% per annum. There were no outstanding
borrowings against this agreement as of February 28, 2004. At February 28, 2004
and at March 1, 2003, the Company had $2,597,266 and $2,754,872 respectively, in
outstanding letters of credit. The outstanding letters of credit for the period
ended February 28, 2004 are part of the unsecured $20,000,000 line of credit.
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 February 28, 2004.
F-12
Total interest charges incurred for the years ended February 28, 2004, March 1,
2003 and March 2, 2002 were $206,000, $237,000 and $302,000, respectively. There
was no capitalized interest for fiscal 2003, 2002 and 2001.
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 cancelled at any time by either party. The
Company is not using this facility.
NOTE 5 - STORE CLOSING COSTS
During fiscal 2002, the Company recorded a store closing cost of $8,000,000
relating to the closing on September 14, 2002 of its downtown Chicago store.
This action was taken by the Company to cut losses being incurred at the store
because ongoing construction, at or near the premises, expected to continue for
several years, rendered the store "unusable" for a retailer. The Company had a
potential rent liability of $11,282,000 for the remainder of the nine year lease
term and the landlord had commenced an action relating to the rents liability
which the Company was defending. The Company reached a settlement with the
landlord in January 2004 resulting in the Company recording an additional
$500,000 in closing costs which were charged to the fourth quarter of fiscal
2003 which ended on February 28, 2004.
NOTE 6 - 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 February 28, 2004 and
March 1, 2003 due to the short-term maturities of these instruments.
NOTE 7 - 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 investment strategy objectives of the plan are continued growth and
income.
All plan assets are managed by outside investment managers. Asset
allocations are reviewed on a regular basis by the investment management
company. Equity securities are primarily S&P 500 which make up 53% of plan
assets. Fixed securities make up the remaining 47% and are made up of the
Lehman Aggregate and Merrill Lynch 1-3 year Government Corp.
The Company uses a December 31 measurement date.
F-13
The following information on the Company's pension plan is provided:
FEBRUARY 28, MARCH 1,
2004 2003
------------ --------
(IN THOUSANDS)
CHANGE IN BENEFIT OBLIGATION:
Net benefit obligation at beginning of year $ 7,842 $ 6,792
Service cost 642 604
Interest cost 494 470
Actuarial loss 506 245
Gross benefits paid (307) (269)
------- -------
Net benefit obligation at end of year $ 9,177 $ 7,842
======= =======
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year $ 5,224 $ 5,555
Employer contributions 542 402
Gross benefits paid (307) (269)
Actual return on plan assets 1,003 (464)
------- -------
Fair value of plan assets at end of year $ 6,462 $ 5,224
======= =======
Funded status at end of year $(2,714) $(2,618)
Unrecognized net actuarial loss 1,789 1,921
Unrecognized transition amount -- --
------- -------
Accrued benefit costs $ (925) $ (697)
======= =======
Pension expenses includes the following components:
FISCAL YEAR ENDED
FEBRUARY 28, MARCH 1, MARCH 2,
2004 2003 2002
----------- ------- -------
(IN THOUSANDS)
COMPONENTS OF NET
PERIODIC BENEFIT COST:
Service cost $ 642 $ 604 $ 532
Interest cost 494 470 424
Return on assets (1,003) 464 338
Amortization of (gain) loss 637 (939) (877)
------- ----- -----
Net periodic benefit cost $ 770 $ 599 $ 417
======= ===== =====
WEIGHTED-AVERAGE ASSUMPTIONS USED:
Discount rate 6% 6.75% 7.00%
Rate of compensation increase 4.5% 4.50% 4.50%
The expected long-term rate of return on plan assets was 8.5% for all
years.
F-14
As of December 31, 2003, the benefits expected to be paid in the next five
years and in the aggregate for the five years thereafter are as follows:
2004 $ 316
2005 338
2006 365
2007 406
2008 450
2009-2013 $3,094
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 February 28, 2004,
March 1, 2003 and March 2, 2002.
NOTE 8 - 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 February 28, 2004 are as follows:
OPERATING
LEASES
-----------
2004 $ 7,825,472
2005 6,549,859
2006 6,295,762
2007 6,175,024
2008 5,527,107
2009 and thereafter 9,505,388
-----------
Total minimum payments $41,878,612
===========
Rent expense for operating leases are as follows:
F-15
FISCAL YEAR ENDED
-----------------------------------
February 28, March 1, March 2,
2004 2003 2002
----------- ------- -------
(In thousands)
Minimum rentals due $ 8,095 $ 8,656 $ 9,341
Escalation rentals accrued (31) 67 324
Contingent rentals -- 9 (20)
Sublease rentals (228) (228) (360)
------- ------- -------
$ 7,836 $ 8,504 $ 9,285
======= ======= =======
b. EMPLOYMENT AGREEMENT - The Company has an employment agreement with its
General Merchandising Manager, expiring 2009, pursuant to which the current
annual compensation is approximately $400,000. 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 February 28,
2004.
NOTE 9 - 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 10 - 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.
No option or stock appreciation rights may be granted under the Stock Option
Plan after July 28, 2013. The maximum exercise period for any option or stock
appreciation right under the plan is ten years from the date the option is
granted (five years for any optionee who holds more than 10% of the voting
rights of the Company). 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:
F-16
FISCAL YEAR ENDED
-----------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
-----------------------------------------------------
FEBRUARY 28, 2004 MARCH 1, 2003 MARCH 2, 2002
----------------- ---------------- ----------------
WEIGHTED WEIGHTED WEIGHTED
FISCAL AVERAGE FISCAL AVERAGE FISCAL AVERAGE
2003 EXERCISE 2002 EXERCISE 2001 EXERCISE
FIXED OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE
----- ----- ----- ----- ----- -----
Outstanding
beginning of year 991 $7.21 1,060 $7.24 1,106 $7.24
Granted -- -- -- -- -- --
Exercised (23) 5.63 (15) 5.63 (1) 5.62
Cancelled (80) 8.58 (54) 8.07 (45) 5.63
- --------------------------------------------------------------------------------
Outstanding, end of period 888 $7.13 991 $7.21 1,060 $7.24
================================================================================
Options exerciseable
at year end 888 $7.13 868 $7.44 786 $7.76
The following table summarizes information about stock options outstanding at
February 28, 2004:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------------- --------------------
WEIGHTED-AVERAGE
NUMBER REMAINING NUMBER
RANGE OF OUTSTANDING AT CONTRACTUAL EXERCISABLE AT
EXERCISE PRICES FEBRUARY 28, 2004 LIFE (YEARS) FEBRUARY 28, 2004
- ---------------------------------------------------------- --------------------
5.625 571,550 5.7 571,550
8.00 87,500 2.6 87,500
8.50 3,600 0.1 3,600
9.875 25,000 3.2 25,000
10.6875 200,000 4.6 200,000
------- -------
887,650 887,650
NOTE 11 - NET INCOME PER SHARE
In accordance with SFAS 128, basic net income (loss) per share has been computed
based upon the weighted average common shares outstanding. Diluted net income
per share gives effect to outstanding stock options, if they are dilutive.
Net loss per share have been computed as follows:
FISCAL 2003 FISCAL 2002 FISCAL 2001
----------- ----------- -----------
(IN THOUSANDS)
BASIC AND DILUTED NET LOSS PER SHARE:
Net loss ($ 4,668) ($ 9,035) ($ 2,319)
Average shares outstanding 15,285 15,661 15,741
Net loss per share ($ 0.31) ($ 0.58) ($ 0.15)
Options to purchase 888,000, 991,000 and 1,060,000 shares of common stock at
prices ranging from $5.625 to $10.6875 per share were outstanding in 2003, 2002
and 2001, respectively, but were not included in the computation
F-17
of diluted net loss per share because the exercise price of the options exceed
the average market price and would have been antidilutive.
NOTE 12 - 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. During fiscal years 2003, 2002 and 2001, the Company
paid to Sy Syms $796,500, $649,125 and $600,000, respectively, in fixed rent.
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
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 and 2001 was not material.
NOTE 13 - UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
QUARTER
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED FEBRUARY 28, 2004
Net sales $63,534 $62,102 $74,345 $75,238
Gross profit 25,914 22,106 31,385 28,346
Net income (loss) (1,749) (4,683) 1,024 720
Net income (loss) per share - basic (0.11) (0.30) 0.07 0.05
Net income (loss) per share - diluted (0.11) (0.30) 0.06 0.05
F-18
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)
In the fourth quarter 2003, the Company recorded a valuation allowance in the
amount of $1,500,000 with regard to expiring net operating loss carry forwards
in the next two years.
F-19
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Syms Corp
Secaucus, New Jersey
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-44254) of Syms Corp of our report dated April 16,
2004, relating to the consolidated financial statements, which appears in the
Annual Report to Shareholders, which is incorporated in this Annual Report on
Form 10-K.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
New York, New York
May 19, 2004
F-20
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Syms Corp on Form S-8 of our report dated April 24, 2003, appearing in and
incorporated by reference in the Annual Report on Form 10-K of Syms Corp for the
year ended February 28, 2004.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
May 17, 2004
F-21