================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended MAY 27, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from _____________ to _____________ COMMISSION FILE NUMBER 1-8546 SYMS CORP (Exact Name of Registrant as Specified in Its Charter) NEW JERSEY 22-2465228 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) SYMS WAY, SECAUCUS, NEW JERSEY 07094 (Address of Principal Executive Offices) (Zip Code) (201) 902-9600 (Registrant's Telephone Number, Including Area Code) NOT APPLICABLE (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- At July 7, 2000 the latest practicable date, there were 15,959,790 shares outstanding of Common Stock, par value $0.05 per share. ================================================================================
-------------------------- SYMS CORP AND SUBSIDIARIES -------------------------- INDEX PAGE NO. PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of May 27, 2000, February 26, 2000 and May 29, 1999 1 Condensed Consolidated Statements of Income for the 13 Weeks Ended May 27, 2000 and May 29, 1999 2 Condensed Consolidated Statements of Cash Flows for the 13 Weeks Ended May 27, 2000 and May 29, 1999 3 Notes to Condensed Consolidated Financial Statements 4-5 Item 2. Management's Discussion and Analysis of Financial Condition 5-7 and Results of Operations Item 3. Quantitative and Qualitative Disclosure about Market Risk n/a PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes In Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K 8 SIGNATURES 8
<TABLE> <CAPTION> -------------------------- SYMS CORP AND SUBSIDIARIES -------------------------- CONDENSED CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------------------------------------- (IN THOUSANDS) MAY 27, FEBRUARY 26, MAY 29, 2000 2000 1999 --------- ------------ --------- (Unaudited) (NOTE) (Unaudited) <S> <C> <C> <C> ASSETS Current Assets Cash and cash equivalents $ 16,790 $ 9,682 $ 14,697 Merchandise inventories 135,948 116,357 136,932 Deferred income taxes 3,324 3,221 2,947 Prepaid expenses and other current assets 2,483 3,002 2,792 --------- --------- --------- TOTAL CURRENT ASSETS 158,545 132,262 157,368 PROPERTY AND EQUIPMENT - Net of accumulated 160,928 162,447 157,835 depreciation and amortization DEFERRED INCOME TAXES 1,135 916 36 OTHER ASSETS 5,207 4,689 5,582 --------- --------- --------- TOTAL ASSETS $ 325,815 $ 300,314 $ 320,821 ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Short Term Borrowings $ -- $ -- $ -- Accounts payable 55,791 27,374 48,321 Accrued expenses & taxes 5,207 7,500 8,066 Accrued insurance 2,900 2,774 1,844 Obligations to customers 2,707 2,733 3,237 Income taxes payable 3,054 4,069 2,256 Current portion of obligations under capital lease -- -- 285 --------- --------- --------- TOTAL CURRENT LIABILITIES 69,659 44,450 64,009 --------- --------- --------- OTHER LONG TERM LIABILITIES 2,584 2,436 1,728 --------- --------- --------- 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; 15,960 shares outstanding (net of 1,928 in treasury shares) on May 27, 2000 and February 26, 2000, and 16,463 shares outstanding (net of 1,424 treasury shares) on May 29, 1999 798 798 823 Additional paid-in capital 13,752 13,752 13,752 Treasury Stock (17,671) (17,671) (14,650) Retained earnings 256,693 256,549 255,159 --------- --------- --------- TOTAL SHAREHOLDERS' EQUITY 253,572 253,428 255,084 --------- --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 325,815 $ 300,314 $ 320,821 ========= ========= ========= </TABLE> NOTE: The balance sheet at February 26, 2000 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to condensed consolidated financial statements 1
-------------------------- SYMS CORP AND SUBSIDIARIES -------------------------- CONDENSED CONSOLIDATED STATEMENTS OF INCOME - ------------------------------------------------------------------------------ (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 13 WEEKS ENDED ---------------------- MAY 27, MAY 29, 2000 1999 -------- -------- (Unaudited) Net sales $ 81,192 $ 79,771 Cost of goods sold 49,875 47,925 -------- -------- Gross profit 31,317 31,846 Expenses: Selling, general and administrative 20,097 19,821 Advertising 3,030 3,620 Occupancy 5,265 4,671 Depreciation and amortization 2,869 2,388 -------- -------- Income from operations 56 1,346 Interest income (180) (21) -------- -------- Income before income taxes 236 1,367 Provision for income taxes 92 533 -------- -------- Net income $ 144 $ 834 ======== ======== Net income per share-basic $ 0.01 $ 0.05 ======== ======== Weighted average shares outstanding-basic 15,960 16,722 ======== ======== Net income per share-diluted $ 0.01 $ 0.05 ======== ======== Weighted average shares outstanding- diluted 15,960 16,723 ======== ======== See notes to condensed consolidated financial statements 2
-------------------------- SYMS CORP AND SUBSIDIARIES -------------------------- <TABLE> <CAPTION> CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) - -------------------------------------------------------------------------------------------- 13 WEEKS ENDED ----------------------- MAY 27, MAY 29, 2000 1999 -------- --------- (UNAUDITED) <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 144 $ 834 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,869 2,388 Deferred income taxes (322) 51 Gain on sale of property and equipment (336) (143) Loss of disposal of assets -- 16 (Increase) decrease in operating assets: Merchandising inventories (19,591) (7,494) Prepaid expenses and other current assets 519 961 Other assets (524) (236) Increase (decrease) in operating liabilities: Accounts payable 28,417 29,053 Accrued expenses (2,167) (359) Obligations to customers (26) (214) Other long term liabilities 148 161 Income taxes (1,015) 26 -------- -------- Net cash provided by operating activities 8,116 25,044 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property and equipment (1,389) (6,422) Proceeds from sale of property and equipment 381 143 -------- -------- Net cash used in investing activities (1,008) (6,279) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of obligations under capital lease -- (134) Revolving line of credit (repayments) borrowings - net -- (2,350) Stock repurchase -- (4,510) -------- -------- Net cash used in financing activities -- (6,994) NET INCREASE IN CASH AND CASH EQUIVALENTS 7,108 11,771 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 9,682 2,926 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 16,790 $ 14,697 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) $ 17 $ 53 ======== ======== Income taxes paid (refunds received) $ 1,430 $ 464 ======== ======== </TABLE> See notes to condensed consolidated financial statements 3
-------------------------- SYMS CORP AND SUBSIDIARIES -------------------------- NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 13 WEEKS ENDED MAY 27, 2000 AND MAY 29, 1999 - ------------------------------------------------------------------------------- (UNAUDITED) NOTE 1 - THE COMPANY Syms Corp (the "Company") operates a chain of 48 "off-price" retail stores located throughout the Northeastern and Middle Atlantic regions and in the Midwest, Southeast and Southwest. Each Syms store offers a broad range of first quality, in season merchandise bearing nationally recognized designer or brand-name labels for men, women and children. NOTE 2 - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the 13 week period ended May 27, 2000 is not necessarily indicative of the results that may be expected for the entire fiscal year ending March 3, 2001. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the fiscal year ended February 26, 2000. NOTE 3 - ACCOUNTING PERIOD The Company's fiscal year ends the Saturday nearest to the end of February. The fiscal year ending March 3, 2001 will be comprised of 53 weeks. The fiscal year ended February 26, 2000 was comprised of 52 weeks. NOTE 4 - MERCHANDISE INVENTORIES Merchandise inventories are stated at the lower of cost (first in, first out) or market, as determined by the retail inventory method. NOTE 5 - BANK CREDIT FACILITIES The Company has an unsecured revolving credit agreement with a bank for a line of credit not to exceed $30,000,000 through May 4, 2001. Interest on individual advances is payable quarterly at 1-1/2% per annum below the bank's base rate, except that at the time of advance, the Company has the option to select an interest rate based upon one of two other alternative calculations, with such rate to be fixed for a period not to exceed 90 days. The average daily unused portion is subject to a commitment fee of 3/8 of 1% per annum. As of May 27, 2000, February 26, 2000 and May 29, 1999 there were no outstanding borrowings under this agreement. The agreement contains financial covenants, with respect to consolidated tangible net worth, as defined, working capital and maximum capital expenditures, including dividends, as well as other financial ratios. In addition, the Company has a separate $20,000,000 credit facility with another bank available for the issuance of letters of credit for the purchase of merchandise and short-term borrowings. This agreement may be canceled at any time by either party. At May 27, 2000, February 26, 2000 and May 29, 1999 the Company had $ 5,874,000, $3,265,000 and $5,842,000, respectively, in outstanding letters of credit. 4
-------------------------- SYMS CORP AND SUBSIDIARIES -------------------------- NOTE 6 - NET INCOME PER SHARE In accordance with SFAS 128, basic net income per share has been computed based upon the weighted average common shares outstanding. Diluted net income per share gives effect to outstanding stock options. Net income per share has been computed as follows: MAY 27, MAY 29, BASIC NET INCOME PER SHARE 2000 1999 ------- ------- Net Income $ 144 $ 834 Average shares outstanding 15,960 16,722 Basic net income per share $ 0.01 $ 0 .05 DILUTED NET INCOME PER SHARE: Net Income $ 144 $ 834 Average shares outstanding 15,960 16,722 Stock options -- 1 Total average equivalent shares 15,960 16,723 DILUTED NET INCOME PER SHARE $ 0.01 $ 0.05 Options to purchase 1,145,000 (including certain options granted in fiscal year 1999 subject to shareholder approval of an amendment to the Company's Amended and Restated Incentive Stock Option and Appreciation Plan to increase the number of shares of common stock for which options may be granted under such plan) and 386,000 shares of common stock at prices ranging from $5.63 to $12.25 per share were outstanding as of May 27, 2000 and May 29, 1999, respectively, but were not included in the computation of diluted net income per share because the exercise price of the options exceed the average market price and would have been antidilutive. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------------------------- SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS The Quarterly Report includes forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) and information relating to the Company that are based on the beliefs of the management of the Company as well as assumptions made by and information currently available to the management of the Company. When used in this Quarterly 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 therein 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. 5
-------------------------- SYMS CORP AND SUBSIDIARIES -------------------------- RESULTS OF OPERATIONS 13 Weeks Ended May 27, 2000 Compared to 13 Weeks Ended May 29, 1999 Net sales of $81,192,000 for the 13 weeks ended May 27, 2000 increased $1,421,000 (1.8%) as compared to net sales of $79,771,000 for the 13 weeks ended May 29, 1999. Comparable store sales decreased 1.8% from the 1999 period. The sales increase in this quarter is largely attributable to the opening of three new stores. Gross profit for the 13 weeks ended May 27, 2000 was $31,317,000 (38.6% as a percentage of net sales), a decrease of $529,000 as compared to $31,846,000 (39.9% as a percentage of net sales) for the fiscal period ended May 29, 1999. This decrease resulted mainly from higher markdowns in the first quarter of this year compared to the comparable period a year ago. Selling, general and administrative expense increased $276,000 to $20,097,000 (24.8% as a percentage of net sales) for the 13 weeks ended May 27, 2000 as compared to $19,821,000 (24.8% as a percentage of net sales) for the 13 weeks ended May 29, 1999. Approximately $1,374,000 of the $20,097,000 relates to the SG&A expense in connection with three new stores located in Towson, MD, Chicago, IL and Lawrenceville, NJ. Advertising expense for the 13 weeks ended May 27, 2000 decreased to $3,030,000, (3.7% as a percentage of net sales) as compared to $3,620,000 (4.5% as a percentage of net sales) in the 13 weeks ended May 29, 1999. Advertising expenses were lower than last year as a result of a reduction in the radio and TV advertising. Occupancy costs were $5,265,000 (6.5% as a percentage of net sales) for the 13 week period ended May 27, 2000, compared to $4,671,000 (5.9% as a percentage of net sales) for the period ended May 29, 1999. The occupancy expenses of the three new stores which amounted to approximately $569,000 accounts for the major portion of this increase. Depreciation and amortization amounted to $2,869,000 (3.5% as a percentage of net sales), an increase of $481,000 as compared to $2,388,000 (3.0% as a percentage of net sales ) for the 13 weeks ended May 29, 1999. This increase is largely attributable to the addition of three new stores. Income before income taxes for the 13 weeks ended May 27, 2000 was $236,000, a decrease of $1,131,000 as compared to $1,367,000 for the 13 weeks ended May 29, 1999. This decrease in profit resulted from lower gross profit and increased expenses. For the 13 week period ended May 27, 2000 the effective income tax rate was 39%, the same as the comparable period a year ago. LIQUIDITY AND CAPITAL RESOURCES Working capital as of May 27, 2000 was $88,886,000, a decrease of $4,473,000 compared to $93,359,000 as of May 29, 1999. The ratio of current assets to current liabilities was 2.28 to 1 as compared to 2.46 to 1 as of May 29, 1999. Net cash provided by operating activities totaled $8,116,000 for the 13 weeks ended May 27, 2000, a decrease of $16,928,000 as compared to $25,044,000 for the 13 weeks ended May 29, 1999. In the 13 week period ended May 27, 2000, cash provided by operating activities was largely impacted by the increased merchandise inventories and decreased profit during this period compared to the comparable period a year ago. 6
-------------------------- SYMS CORP AND SUBSIDIARIES -------------------------- Net cash used in investing activities was $1,008,000 for the 13 weeks ended May 27, 2000, and $6,279,000 in 1999. Expenditures for property and equipment totaled $1,389,000 and $6,422,000 for the 13 weeks ended May 27, 2000 and May 29, 1999, respectively. Net cash used in financing activities was 0 for the 13 weeks ended May 27, 2000 and $6,994,000 for the 13 weeks ended May 29, 1999. The Company has a revolving credit agreement with a bank for a line of credit not to exceed $30,000,000 through May 4, 2001. Except for funds provided from this credit agreement, the Company has satisfied its operating and capital expenditure requirements, including those for the opening and expansion of stores, from internally generated funds. As of May 27, 2000 and May 29, 1999 there were no outstanding borrowings under the revolving credit agreement. The Company has planned capital expenditures of approximately $5,000,000 for the fiscal year ending March 3, 2001. Through the 13 week period ended May 27, 2000 the Company has incurred $1,389,000 of capital expenditures. 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 ending March 3, 2001. 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. RECENT ACCOUNTING PRONOUNCEMENTS In December 1999 the staff of the SEC issued Staff Accounting Bulletin 101 ("SAB101") on revenue recognition, the implementation of which was subsequently delayed. The Company is currently evaluating the impact of SAB101. 7
-------------------------- SYMS CORP AND SUBSIDIARIES -------------------------- PART II. OTHER INFORMATION - -------------------------------------------------------------------------------- Item 1. LEGAL PROCEEDINGS - None Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS - None Item 3. DEFAULTS UPON SENIOR SECURITIES - None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None Item 5. OTHER INFORMATION - None Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit 10 - Second Amendment to the Revolving Credit Agreement dated as of May 27, 2000, between Syms Corp and Summit Bank (b) Exhibit 27 - Financial Data Schedule SIGNATURES Pursuant to the requirements 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 DATE: JULY 10, 2000 BY /s/MARCY SYMS --------------------------------------- Marcy Syms CHIEF EXECUTIVE OFFICER DATE: JULY 10, 2000 BY /s/ANTONE F. MOREIRA --------------------------------------- Antone F. Moreira VICE PRESIDENT, CHIEF FINANCIAL OFFICER (Principal Financial and Accounting Officer) 8