================================================================================ 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 June 2, 2001 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 Identification No.) Incorporation or Organization) 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 10, 2001 the latest practicable date, there were 15,737,390 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 June 2, 2001, March 3, 2001 and May 27, 2000 1 Condensed Consolidated Statements of Operations for the 13 Weeks Ended June 2, 2001 and May 27, 2000 2 Condensed Consolidated Statements of Cash Flows for the 13 Weeks Ended June 2, 2001 and May 27, 2000 3 Notes to Condensed Consolidated Financial Statements 4-5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-7 Item 3. Quantitative and Qualitative Disclosure about Market Risk n/a PART II. OTHER INFORMATION 8 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 SIGNATURES 8
-------------------------- SYMS CORP AND SUBSIDIARIES -------------------------- CONDENSED CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------- (IN THOUSANDS) <TABLE> <CAPTION> JUNE 2, MARCH 3, MAY 27, 2001 2001 2000 --------- --------- --------- (UNAUDITED) (NOTE) (UNAUDITED) <S> <C> <C> <C> ASSETS Current Assets Cash and cash equivalents $ 23,306 $ 7,485 $ 16,790 Merchandise inventories 109,797 99,186 135,948 Deferred income taxes 6,472 6,252 3,324 Prepaid expenses and other current assets 3,599 4,238 2,483 --------- --------- --------- TOTAL CURRENT ASSETS 143,174 117,161 158,545 PROPERTY AND EQUIPMENT - Net 147,747 150,587 160,928 DEFERRED INCOME TAXES 3,170 2,924 1,135 OTHER ASSETS 7,710 6,195 5,207 --------- --------- --------- OTHER ASSETS $ 301,801 $ 276,867 $ 325,815 ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 41,881 $ 16,453 $ 55,791 Accrued expenses 8,918 8,347 8,261 Accrued insurance 2,977 2,813 2,900 Obligations to customers 2,871 2,910 2,707 --------- --------- --------- TOTAL CURRENT LIABILITIES 56,647 30,523 69,659 OTHER LONG TERM LIABILITIES 2,156 2,409 2,584 --------- --------- --------- 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; 15,737 shares outstanding (net of 2,152 in treasury shares) on June 2, 2001, 15,760 shares outstanding as of March 3, 2001 (net of 2,128 treasury shares) and 15,960 shares outstanding (net of 1,928 treasury shares) on May 27, 2000 787 788 798 Additional paid-in capital 13,759 13,752 13,752 Treasury Stock (18,987) (18,821) (17,671) Retained earnings 247,439 248,216 256,693 --------- --------- --------- TOTAL SHAREHOLDERS' EQUITY 242,998 243,935 253,572 --------- --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 301,801 $ 276,867 $ 325,815 ========= ========= ========= </TABLE> NOTE: The balance sheet at March 3, 2001 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 OPERATIONS - -------------------------------------------------------------------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 13 WEEKS ENDED ---------------------- JUNE 2, MAY 27, 2001 2000 -------- -------- (Unaudited) Net sales $ 71,554 $ 81,192 Cost of goods sold 42,084 49,875 -------- -------- Gross profit 29,470 31,317 Expenses: Selling, general and administrative 20,501 20,097 Advertising 2,647 3,030 Occupancy 4,740 5,265 Depreciation and amortization 2,947 2,869 -------- -------- Income (loss) from operations (1,365) 56 Interest income (92) (180) -------- -------- Income (loss) before income taxes (1,273) 236 Provision (benefit) for income taxes (496) 92 -------- -------- Net income (loss) $ (777) $ 144 ======== ======== Net income (loss) per share-basic $ (0.05) $ 0.01 ======== ======== Weighted average shares outstanding-basic 15,751 15,960 ======== ======== Net income (loss) per share-diluted $ (0.05) $ 0.01 ======== ======== Weighted average shares outstanding-diluted 15,751 15,960 ======== ======== See notes to condensed consolidated financial statement 2
-------------------------- SYMS CORP AND SUBSIDIARIES -------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) - -------------------------------------------------------------------------------- 13 WEEKS ENDED ---------------------- JUNE 2, MAY 27, 2001 2000 -------- -------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (777) $ 144 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 2,947 2,869 Deferred income taxes (466) (322) Gain on sale of property and equipment -- (336) Loss of disposal of assets 11 -- (Increase) decrease in operating assets: Merchandising inventories (10,611) (19,591) Prepaid expenses and other current assets 639 519 Other assets (1,526) (524) Increase (decrease) in operating liabilities: Accounts payable 25,428 28,417 Accrued expenses 735 (3,182) Obligations to customers (39) (26) Other long term liabilities (253) 148 -------- -------- Net cash provided by operating activities 16,088 8,116 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property and equipment (107) (1,389) Proceeds from sale of property and equipment -- 381 -------- -------- Net cash used in investing activities (107) (1,008) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Exercise of options 7 -- Stock repurchase (167) -- -------- -------- Net cash used in financing activities (160) -- NET INCREASE IN CASH AND CASH EQUIVALENTS 15,821 7,108 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,485 9,682 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 23,306 $ 16,790 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) $ 271 $ 17 ======== ======== Income taxes paid (refunds received) $ 43 $ 1,430 ======== ======== See notes to condensed consolidated financial statements 3
-------------------------- SYMS CORP AND SUBSIDIARIES -------------------------- NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 13 WEEKS ENDED JUNE 2, 2001 AND MAY 27, 2000 - -------------------------------------------------------------------------------- (UNAUDITED) NOTE 1 - THE COMPANY Syms Corp (the "Company") operates a chain of 45 "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 June 2, 2001 is not necessarily indicative of the results that may be expected for the entire fiscal year ending March 2, 2002. 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 March 3, 2001. NOTE 3 - ACCOUNTING PERIOD The Company's fiscal year ends the Saturday nearest to the end of February. The fiscal year ending March 2, 2002 will be comprised of 52 weeks. The fiscal year ended March 3, 2001 was comprised of 53 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 3, 2002. 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 June 2, 2001, March 3, 2001 and May 27, 2000 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 $10,000,000 credit facility with another bank available for the issuance of letters of credit for the purchase of merchandise. This agreement may be canceled at any time by either party. At June 2, 2001, March 3, 2001 and May 27, 2000 the Company had $5,215,000, $2,593,000 and $5,874,000, 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: JUNE 2, MAY 27, BASIC NET INCOME PER SHARE 2001 2000 ---- ---- Net income (loss) $ (777) $ 144 Average shares outstanding 15,751 15,960 BASIC NET INCOME (LOSS) PER SHARE $ (0.05) $ 0.01 Diluted net income per share: Net income (loss) $ (777) $ 144 Average shares outstanding 15,751 15,960 Stock options -- -- Total average equivalent shares 15,751 15,960 DILUTED NET INCOME PER SHARE $ (0.05) $ 0.01 In periods with losses, options were excluded from the computation of diluted net income per share because the effect would be anti-dilutive. Options to purchase 406,000 and 1,145,000 shares of common stock at prices ranging from $5.63 to $12.25 per share were outstanding as of June 2, 2001 and May 27, 2000, 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. NOTE 7 - SPECIAL CHARGES During the third quarter of 2000, the Company recorded a store closing cost of $12,935,000 relating to a plan to close five stores and an additional lease commitment cost associated with a previously closed store. As of June 2, 2001, the amount remaining in the closed store accrual recorded in the third quarter of 2000 is $1,541,000, primarily relating to severance and lease obligations, which will be paid out periodically through January, 2004. The total restructuring accrual at June 2, 2001 of $1,541,000 is included within accrued expenses. NOTE 8 - DERIVATIVE INSTRUMENTS During the first quarter of fiscal 2001, the Company adopted Statements of Financial Accounting Standards No. 133 and 138, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133 and SFAS 138). SFAS 133 established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities requiring all companies to recognize derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS 138 is an amendment to SFAS 133, which modified certain issues discussed in SFAS 133. Implementation of SFAS 133 and SFAS 138 did not have a material impact on the Company's statement of financial position, results of operations or cash flows. 5
-------------------------- SYMS CORP AND SUBSIDIARIES -------------------------- 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. RESULTS OF OPERATIONS 13 Weeks Ended June 2, 2001 Compared to 13 Weeks Ended May 27, 2000 Net sales of $71,554,000 for the 13 weeks ended June 2, 2001 decreased $9,638,000 (11.9%) as compared to net sales of $81,192,000 for the 13 weeks ended May 27, 2000. The closing of the Boston, Massachusetts and the Gurnee, Illinois stores amounted to approximately $2,330,000 of the decrease in the first quarter of 2001. Comparable store sales decreased 9.3% from the comparable 13 week period in fiscal 2000. The decline in comparable store sales is largely attributable to the continuing difficult economic climate that the Company and other retailers are and have been experiencing. Gross profit for the 13 weeks ended June 2, 2001 was $29,470,000 (41.2% as a percentage of net sales), a decrease of $1,847,000 as compared to $31,317,000 (38.6% as a percentage of net sales) for the fiscal period ended May 27, 2000. Although such gross profit percentage improved from 38.6% to 41.9%, the decline in overall gross profit is largely attributable to the decline in the Company's net sales. Selling, general and administrative expense increased $404,000 to $20,501,000 (28.7% as percentage of net sales) for the 13 weeks ended June 2, 2001 as compared to $20,097,000 (24.8% as a percentage of net sales) for the 13 weeks ended May 27, 2000. The SG&A expense for the 13 weeks ended May 27, 2000 included a gain of $335,000 on land sold in Marietta, GA and a one-time gain of $202,000. Advertising expense for the 13 weeks ended June 2, 2001 decreased to $2,647,000, (3.7% as a percentage of net sales) as compared to $3,030,000 (3.7% as a percentage of net sales) for the 13 weeks ended May 27, 2000. Advertising expenses were lower than the comparable period last year as a result of a reduction in newspaper advertising. Occupancy costs were $4,740,000 (6.6% as a percentage of net sales) for the 13 week period ended June 2, 2001, as compared to $5,265,000 (6.5% as a percentage of net sales) for the 13 weeks ended May 27, 2000. 6
-------------------------- SYMS CORP AND SUBSIDIARIES -------------------------- The occupancy expenses for the current period reflect the closing of the Boston, Massachusetts and Gurnee, Illinois stores. Depreciation and amortization amounted to $2,947,000 (4.1% as a percentage of net sales), an increase of $78,000 as compared to $2,869,000 (3.5% as a percentage of net sales) for the 13 weeks ended May 27, 2000. This increase is largely attributable to the purchase of new POS registers and software in the latter part of fiscal 2000. Net loss before income taxes for the 13 weeks ended June 2, 2001 was $1,273,000 as compared to net income before income taxes of $236,000 for the 13 weeks ended May 27, 2000. The comparable store sales decline of 9.3% significantly contributed to this loss. For the 13 week period ended June 2, 2001 the effective income tax rate was 39%, the same as the comparable period last year. LIQUIDITY AND CAPITAL RESOURCES Working capital as of June 2, 2001 was $86,527,000, a decrease of $2,359,000 compared to $88,886,000 as of May 27, 2000. The ratio of current assets to current liabilities was 2.53 to 1 as compared to 2.28 to 1 as of May 27, 2000. Net cash provided by operating activities totaled $16,088,000 for the 13 weeks ended June 2, 2001, an increase of $7,972,000 as compared to $8,116,000 for the 13 weeks ended May 27, 2000. Net cash used in investing activities was $107,000 for the 13 weeks ended June 2, 2001, and $1,008,000 for the 13 weeks ended May 27, 2000. Expenditures for property and equipment totaled $107,000 and $1,389,000 for the 13 weeks ended June 2, 2001 and May 27, 2000, respectively. Net cash used in financing activities was $160,000 for the 13 weeks ended June 2, 2001 and $0 for the 13 weeks ended May 27, 2000. The Company has a revolving credit agreement with a bank for a line of credit not to exceed $30,000,000 through May 3, 2002. Except for funds provided from this credit agreement, the Company has satisfied its operating and capital expenditure requirements needs. As of June 2, 2001 and May 27, 2000 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 2, 2002. Through the 13 week period ended June 2, 2001 the Company has incurred $107,000 of capital expenditures. The Company's Board of Directors had authorized the repurchase of up to 15% of its outstanding shares of common stock at prevailing market prices through October 12, 2001. During the 13 week period ended June 2, 2001, the Company purchased 23,700 shares which represented .2% of its outstanding shares at a total cost of $167,048. 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 2, 2002. 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. 7
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 - None 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 13, 2001 BY /s/ MARCY SYMS ---------------- --------------------------- MARCY SYMS CHIEF EXECUTIVE OFFICER DATE: JULY 13, 2001 BY /s/ ANTONE F. MOREIRA ---------------- --------------------------- ANTONE F. MOREIRA VICE PRESIDENT, CHIEF FINANCIAL OFFICER (Principal Financial and Accounting Officer) 8