-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TJvHJ0wM+HfL6vE7SLwvCW1T3IuU83DcSo2KyBx1o0R7WxrWvdNXeUO26/OYQnvy s26IxOBtnofXBjzj6Vf5PA== 0000950110-02-000683.txt : 20021010 0000950110-02-000683.hdr.sgml : 20021010 20021010132731 ACCESSION NUMBER: 0000950110-02-000683 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020831 FILED AS OF DATE: 20021010 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYMS CORP CENTRAL INDEX KEY: 0000724742 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FAMILY CLOTHING STORES [5651] IRS NUMBER: 222465228 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0301 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08546 FILM NUMBER: 02786134 BUSINESS ADDRESS: STREET 1: SYMS WAY CITY: SECAUCUS STATE: NJ ZIP: 07094 BUSINESS PHONE: 2019029600 MAIL ADDRESS: STREET 1: SYMS WAY CITY: SECAUCUS STATE: NJ ZIP: 07094 10-Q 1 e90075_10-q.txt QUARTERLY REPORT ================================================================================ 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 AUGUST 31, 2002 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 October 4, 2002, the latest practicable date, there were 15,621,278 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 August 31, 2002, March 2, 2002 and September 1, 2001 .............. 1 Condensed Consolidated Statements of Operations for the 13 Weeks and 26 Weeks Ended August 31, 2002 and September 1, 2001 . 2 Condensed Consolidated Statements of Cash Flows for the 26 Weeks Ended August 31, 2002 and September 1, 2001 .............. 3 Notes to Condensed Consolidated Financial Statements .............. 4-7 Item 2. Management's Discussion and Analysis of Financial Condition ....... 7-11 and Results of Operations Item 3. Quantitative and Qualitative Disclosure about Market Risk ......... 11 Item 4. Controls and Procedures ........................................... 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings ........................................ 11 Item 2. Changes In Securities and Use of Proceeds 11 Item 3. Defaults Upon Senior Securities .......................... 11 Item 4. Submission of Matters to a Vote of Security Holders ...... 11 Item 5. Other Information ........................................ 12 Item 6. Exhibits and Reports on Form 8-K ......................... 12 SIGNATURES ................................................................ 13 ----------------------------- SYMS CORP AND SUBSIDIARIES -----------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------- (IN THOUSANDS) AUGUST 31, MARCH 2, SEPTEMBER 1, 2002 2002 2001 ----------- ---------- ------------ (UNAUDITED) (NOTE) (UNAUDITED) ASSETS Current Assets Cash and cash equivalents ........................................ $ 23,166 $ 19,485 $ 6,176 Merchandise inventories .......................................... 99,025 86,810 113,737 Deferred income taxes ............................................ 6,514 6,514 8,831 Prepaid expenses and other current assets ........................ 3,946 6,071 6,165 --------- --------- --------- TOTAL CURRENT ASSETS ........................................... 132,651 118,880 134,909 --------- --------- --------- PROPERTY AND EQUIPMENT - Net ........................................ 139,806 147,186 150,959 DEFERRED INCOME TAXES ............................................... 4,392 2,309 2,383 OTHER ASSETS ........................................................ 8,998 8,119 8,042 --------- --------- --------- TOTAL ASSETS ................................................... $ 285,847 $ 276,494 $ 296,293 ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable ................................................. 35,671 17,867 39,029 Accrued expenses ................................................. 7,232 8,845 8,451 Accrued insurance ................................................ 2,667 3,144 2,993 Obligations to customers ......................................... 3,027 3,063 2,798 --------- --------- --------- TOTAL CURRENT LIABILITIES ...................................... 48,597 32,919 53,271 --------- --------- --------- OTHER LONG TERM LIABILITIES ......................................... 2,163 2,118 2,101 --------- --------- --------- 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; 15,621 shares outstanding (net of 2,313 in treasury stock) on August 31, 2002; 15,737 shares outstanding as of March 2, 2002 (net of 2,152 treasury shares) and 15,736 shares outstanding (net of 2,152 treasury shares) on September 1, 2001 ............. 793 787 787 Additional paid-in capital ....................................... 14,007 13,760 13,759 Treasury stock ................................................... (20,147) (18,987) (18,987) Retained earnings ................................................ 240,434 245,897 245,362 --------- --------- --------- TOTAL SHAREHOLDERS' EQUITY ..................................... 235,087 241,457 240,921 --------- --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..................... $ 285,847 $ 276,494 $ 296,293 ========= ========= =========
NOTE: The balance sheet at March 2, 2002 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 26 WEEKS ENDED ------------------------------ ----------------------------- AUGUST 31, SEPTEMBER 1, AUGUST 31, SEPTEMBER 1, 2002 2001 2002 2001 --------- ------------ --------- ------------ (Unaudited) (Unaudited) Net sales ................................. $ 65,058 $ 65,319 $ 133,008 $ 136,873 Cost of goods sold ........................ 42,079 42,845 80,932 84,929 --------- --------- --------- --------- Gross profit .............................. 22,979 22,474 52,076 51,944 Expenses: Selling, general and administrative ....... 19,053 19,460 37,818 39,961 Advertising ............................... 2,045 1,511 4,289 4,158 Occupancy ................................. 4,650 4,712 9,151 9,452 Depreciation and amortization ............. 2,762 2,923 5,572 5,870 Special charge ............................ 4,000 -- 4,000 -- --------- --------- --------- --------- Loss from operations ...................... (9,531) (6,132) (8,754) (7,497) Other income .............................. (355) (3,000) (809) (3,000) Interest income ........................... (45) (15) (99) (107) --------- --------- --------- --------- Loss before income taxes .................. (9,131) (3,117) (7,846) (4,390) Provision benefit for income taxes ........ (2,962) (1,040) (2,384) (1,536) --------- --------- --------- --------- Net loss .................................. $ (6,169) $ (2,077) $ (5,462) $ (2,854) ========= ========= ========= ========= Net loss per share-basic .................. $ (0.39) $ (0.13) $ (0.35) $ (0.18) ========= ========= ========= ========= Weighted average shares outstanding-basic . 15,721 15,744 15,721 15,744 ========= ========= ========= ========= Net loss per share-diluted ................ $ (0.39) $ (0.13) $ (0.35) $ (0.18) ========= ========= ========= ========= Weighted average shares outstanding-diluted 15,721 15,744 15,721 15,744 ========= ========= ========= =========
See Notes to Condensed Consolidated Financial Statements 2 ----------------------------- SYMS CORP AND SUBSIDIARIES -----------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - -------------------------------------------------------------------------------- (IN THOUSANDS) 26 WEEKS ENDED ------------------------------ AUGUST 31, SEPTEMBER 1, 2002 2001 ----------- ------------ (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ............................................................. $ (5,462) $ (2,854) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization ........................................ 5,572 5,870 Deferred income taxes ................................................ -- (2,038) Gain on sale of property and equipment ............................... -- (31) Loss of disposal of assets ........................................... 4,033 29 (Increase) decrease in operating assets: Merchandise inventories ......................................... (12,215) (14,551) Prepaid expenses and other current assets ....................... 2,125 (1,927) Other assets .................................................... (775) (1,862) (Increase) decrease of operating liabilities: Accounts payable ................................................ 17,772 22,576 Accrued expenses ................................................ (2,090) 284 Obligations to customers ........................................ (36) (112) Other long term liabilities ..................................... 45 (308) -------- -------- Net cash provided by operating activities .................. 8,969 5,076 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Stanley Blacker, Inc. ................................. (1,906) -- Expenditures for property and equipment .............................. (2,225) (6,256) Proceeds from sale of property and equipment ......................... -- 31 -------- -------- Net cash used in investing activities ...................... (4,131) (6,225) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Exercise of options .................................................. 253 7 Stock repurchase ..................................................... (1,160) (167) -------- -------- Net cash used in financing activities ...................... (907) (160) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ...................... 3,681 (1,309) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ............................ 19,485 7,485 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD .................................. $ 23,166 $ 6,176 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) ............................ $ -- $ 299 ======== ======== Income taxes paid (refunds received) ............................ $ -- $ 75 ======== ======== Stanley Blacker, Inc. acquisition financed through stock issuance $ 250 $ -- ======== ========
See Notes to Condensed Consolidated Financial Statements 3 ----------------------------- SYMS CORP AND SUBSIDIARIES ----------------------------- NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 13 AND 26 WEEKS ENDED AUGUST 31, 2002 AND SEPTEMBER 1, 2001 - -------------------------------------------------------------------------------- (UNAUDITED) NOTE 1 - THE COMPANY Syms Corp (the "Company") operates a chain of 41 "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 and 26 week periods ended August 31, 2002 are not necessarily indicative of the results that may be expected for the entire fiscal year ending March 1, 2003. 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 2, 2002. NOTE 3 - ACCOUNTING PERIOD The Company's fiscal year ends the Saturday nearest to the end of February. The fiscal year ending March 1, 2003 will be comprised of 52 weeks. The fiscal year ended March 2, 2002 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 $20,000,000 through July 31, 2003. Interest on individual advances is payable quarterly at 1/2% per annum below the bank's base rate, except that at the time of advance, the Company has the option to select an interest rate based upon one other alternative 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 3/8 of 1% per annum. As of August 31, 2002, March 2, 2002 and September 1, 2001, respectively, 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 (defined to include cash repurchases of capital stock), as well as other financial ratios. The Company was in compliance with all covenants as of August 31, 2002. In addition, the Company has a separate $10,000,000 credit facility with another bank available for the issuance of letters of credit for the purchase of foreign merchandise. This agreement may be canceled at any time by either party. At August 31, 2002, March 2, 2002 and September 1, 2001, the Company had $6,258,000, $4,564,000 and $4,784,000, 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 loss income per share has been computed as follows:
13 WEEKS ENDED 26 WEEKS ENDED ---------------------------------- ----------------------------------- AUGUST 31, 2002 SEPTEMBER 1, 2001 AUGUST 31, 2002 SEPTEMBER 1, 2001 --------------- ----------------- --------------- ----------------- BASIC NET LOSS PER SHARE: Net loss ....................... $ (6,169) $ (2,077) $ (5,462) $ (2,854) Average shares outstanding ..... 15,721 15,744 15,721 15,744 Basic net loss per share ....... $ (0.39) $ (0.13) $ (0.35) $ (0.18) DILUTED NET LOSS PER SHARE: Net loss ....................... $ (6,169) $ (2,077) $ (5,462) $ (2,854) Average shares outstanding ..... 15,721 15,744 15,721 15,744 Stock options .................. -- -- -- -- Total average equivalent shares ......................... 15,721 15,744 15,721 15,744 Diluted net loss per share ..... $ (0.39) $ (0.13) $ (0.35) $ (0.18)
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 1,020,175 and 1,068,750 shares of common stock at prices ranging from $5.63 to $11.50 per share were outstanding as of August 31, 2002 and September 1, 2001, 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 anti-dilutive. NOTE 7 - SPECIAL CHARGES The Company closed its downtown Chicago store on September 14, 2002. The decision to close this store resulted from construction at neighboring premises which substantially impaired ingress and egress of this location. It is estimated this construction will last two or three more years. As a result of this decision, the Company recorded a $4,000,000 charge (write-off of capital assets) to the second quarter results for the period ended August 31, 2002. The Company has a potential rent liability of $11,282,000 for the remainder of the nine-year lease term; however, the Company is unable to quantify the extent of any liability at this time. During the third quarter of fiscal 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 August 31, 2002, the amount remaining in the closed store accrual recorded in the third quarter of fiscal 2000 is $78,562. Primarily relating to severance and lease obligations, which will be paid out periodically through January, 2004. The total restructuring accrual at August 31, 2002 of $78,562 is included within accrued expenses. 5 ----------------------------- SYMS CORP AND SUBSIDIARIES ----------------------------- NOTE 8 - STANLEY BLACKER, INC. ACQUISITION On January 10, 2002, an independent 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 trademarks and trade names licensed to third party manufacturers of clothing and accessories. 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 taking of the assets subject to a note payable to Fleet National Bank in the principal amount of $1,655,000 together with interest thereon of approximately $11,355, which note was paid in full by the Company. The Company's financial statements include the results of operations of Stanley Blacker, Inc. from the date of acquisition. Purchase Price: Cash ................................... $1,905,000 Stock .................................. 250,000 Purchase price ......................... 2,155,000 Preliminary Allocation of Purchase Price Receivables ............................ $ 104,000 Deferred Tax Assets .................... 2,083,000 Payables ............................... 32,000 The impact on earnings from the Stanley Blacker, Inc. acquisition for the 26 weeks ended August 31, 2002 was not material. NOTE 9 - OTHER INCOME Other income was recorded by the Company amounting to approximately $809,000 resulting primarily from $650,000 of restitution on an employee theft and partial insurance recovery of $150,000 related to business interruption at the Trinity store. Other income for last year reflects an insurance recovery of $3,000,000 related to employee theft. NOTE 10 - RECENTLY ISSUED ACCOUNTING STANDARDS In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses the accounting and reporting for the impairment or disposal of long-lived assets. The statement provides a single accounting model for long-lived assets to be disposed of. New criteria must be met to classify the asset as an asset held-for-sale. This statement also focuses on reporting the effects of a disposal of a segment of a business. This statement is effective for fiscal years beginning after December 15, 2001. The Company has determined that the adoption of SFAS No. 144 will not have a material impact on the Company's financial position or results of operations. 6 ----------------------------- SYMS CORP AND SUBSIDIARIES ----------------------------- NOTE 11 - NEW ACCOUNTING STANDARDS In April 2002, SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections" ("SFAS 145") was issued. SFAS 145 rescinds SFAS 4 and 64, which required gains and losses from extinguishment of debt to be classified as extraordinary items. SFAS also rescinds SFAS 44 since the provisions of the Motor Carrier Act of 1980 are complete. SFAS 145 also amends SFAS 13 eliminating inconsistencies in certain sale-leaseback transactions. The provisions of SFAS 145 are effective for fiscal years beginning after May 15, 2002. Any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented shall be reclassified. The Company does not expect that the adoption of SFAS 145 will have a material effect on the Company's financial position or results of operations. SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, was issued in July 2002. SFAS No. 146 replaces current accounting literature and requires the recognition of costs associated with exit or disposal activities when they are incurred rather than at the date of commitment to an exit or disposal plan. The provisions of the Statement are effective for exit or disposal activities that are initiated after December 31, 2002. The Company does not anticipate the adoption of this statement will have a material effect on the Company's financial position or results of operations. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS The Quarterly 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 Quarterly Report on Form 10-Q) 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 and elsewhere described in this Quarterly Report and other reports filed with the Securities and Exchange Commission. CRITICAL ACCOUNTING POLICIES AND ESTIMATE The preparation of financial statements in conformity with generally accepted accounting principles 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. 7 ----------------------------- SYMS CORP AND SUBSIDIARIES ----------------------------- 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 the Annual Report for the year ended March 2, 2002. The Company has identified certain critical accounting policies that are described below. MERCHANDISE INVENTORY - Inventories are valued at lower of cost or market using the retail first-in, first-out ("FIFO") inventory method. Under the retail inventory method ("RIM"), the valuation of inventories at cost and the resulting gross margins are calculated by applying a calculated cost to retail ratio to the retail value of inventories. RIM is an averaging method that has been widely used in the retail industry due to its practicality. Additionally, it is recognized that the use of RIM will result in valuing inventories at the lower of cost or market if markdowns are currently taken as a reduction of the retail value of inventories. Inherent in the RIM calculation are certain significant management judgments and estimates including, among others, merchandise markon, markups, and markdowns, which significantly impact the ending inventory valuation at cost as well as resulting gross margins. Management believes that the Company's RIM and application of FIFO provides an inventory valuation which reasonably approximates cost using a first-in, first-out assumption and results in carrying value at the lower of cost or market. If actual market conditions are less favorable than those projected by management, additional markdowns may be required. LONG-LIVED ASSET - In evaluation of the fair value and future benefits of long-lived assets, the Company performs analyses of the anticipated undiscounted future net cash flows of the related long-lived assets. If the carrying value of the related asset exceeds the undiscounted cash flows, the Company reduces the carrying value to its fair value, which is generally calculated using discounted cash flows. Various factors including future sales growth and profit margins are included in this analysis. To the extent these future projections or our strategies change, the conclusion regarding impairment may differ from the Company's current estimates. 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. RESULTS OF OPERATIONS 13 and 26 Weeks Ended August 31, 2002 Compared to 13 and 26 Weeks Ended September 1, 2001 Net sales of $65,058,000 for the 13 weeks ended August 31, 2002 decreased $261,000 (.4%) as compared to net sales of $65,319,000 for the 13 weeks ended September 1, 2001. For the 26 weeks ended August 31, 2002, net sales decreased $3,865,000 (2.8%) to $133,008,000 as compared to net sales of $136,873,000 for the 26 weeks ended August 26, 2000. Comparable store sales increased 0.5% for the 13 weeks ended August 31, 2002 and decreased 0.7% for the 26 weeks ended August 31, 2002, as compared to the comparable periods in the prior fiscal year. The sales decrease in the 26 week period is largely attributable to the closing of the Sharonville, OH, Potomac, VA and Franklin Mills, PA stores (sales of closed stores amounted to $1,388,000 for the 13 weeks and $3,578,000 for the 26 weeks) during the same period in the prior fiscal year. 8 ----------------------------- SYMS CORP AND SUBSIDIARIES ----------------------------- Gross profit for the 13 weeks ended August 31, 2002 was $22,979,000 (35.3% as a percentage of net sales), an increase of $505,000 as compared to $22,474,000 (34.4% as a percentage of net sales) for the 13 weeks ended September 1, 2001. Gross profit for the 26 weeks ended August 31, 2002 was $52,076,000, an increase of $132,000 as compared to $51,944,000 for the 26 weeks ended September 1, 2001. The increase sin gross profit in the 13 and 26 week periods are largely attributable to less markdowns on merchandise sold compared to the same periods in the prior fiscal year. Selling, general and administrative expense decreased $407,000 to $19,053,000 (29.3% as a percentage of net sales) for the 13 weeks ended August 31, 2002 as compared to $19,460,000 (29.8% as a percentage of net sales) for the 13 weeks ended September 1, 2001. Selling, general and administrative expense decreased $2,143,000 to $37,818,000 (28.4% as a percentage of total net sales) for the 26 weeks ended August 31, 2002 as compared to $39,961,000 (29.2% as a percentage of total net sales) for the 26 weeks ended September 1, 2001. The decrease in both the 13 week and 26 week periods results primarily from the closing of three stores (a decrease of $639,000 in the 13 weeks and $1,444,000 in the 26 weeks) during the same periods in the prior fiscal year (Sharonville, OH, Potomac, VA and Franklin Mills, PA) and a continued focus on further expense reductions in all areas of the Company. Advertising expense for the 13 weeks ended August 31, 2002 was $2,045,000 (3.1% as a percentage of net sales) as compared to $1,511,000 (2.3% as a percentage of net sales) in the 13 weeks ended September 1, 2001. Advertising expense for the 26 weeks ended August 31, 2002 was $4,289,000 (3.2% as a percentage of net sales) as compared to $4,158,000 (3.0% as a percentage of net sales) in the 26 weeks ended September 1, 2001. Occupancy costs were $4,650,000 (7.2% as a percentage of net sales) for the 13 weeks ended August 31, 2002 as compared to $4,712,000 (7.2% as a percentage of net sales) for the 13 weeks ended September 1, 2001. Occupancy costs were $9,151,000 (6.9% as a percentage of net sales) for the 26 weeks ended August 31, 2002 as compared to $9,452,000 (6.9% as a percentage of net sales) for the period ended September 1, 2001. The closing of three stores during the same periods in the prior fiscal year (Sharonville, OH, Potomac, VA and Franklin Mills, PA) accounted for this reduction in the 13 and 26 week periods. Depreciation and amortization was $2,762,000 (4.3% as a percentage of net sales) for the 13 weeks ended August 31, 2002 as compared to $2,923,000 (4.5% as a percentage of net sales) for the 13 weeks ended September 1, 2001. Depreciation and amortization for the 26 weeks ended August 31, 2002 was $5,572,000 (4.2% as a percentage of net sales) as compared to $5,870,000 (4.3% as a percentage of net sales) for the 26 weeks ended September 1, 2001. During the second quarter, 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. The Company has a potential rent liability of $11,282,000 for the remainder of the nine-year lease term; however, the Company is unable to quantify the extent of any liability at this time. 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. In the 13 and 26 week periods ended August 31, 2002, the Company recorded other income of $809,000 (primarily $650,000 restitution on employee theft and $150,000 advance payment or business interruption insurance). The results for the second quarter of last fiscal year reflect income from an insurance recovery relating to an employee theft of approximately $3,000,000. The loss before income taxes for the 13 weeks ended August 31, 2002 was $9,131,000, an increase of $6,014,000 as compared to a loss of $3,117,000 for the 13 weeks ended September 1, 2001. The loss before income taxes for the 26 weeks ended August 31, 2002 was $7,846,000 as compared to a loss before taxes $4,390,000 for the 26 weeks ended September 1, 2001. This increase in loss resulted principally from the special store closing charge of $4,000,000 and the insurance recovery non-recurring charge last year of $3,000,000. 9 ----------------------------- SYMS CORP AND SUBSIDIARIES ----------------------------- For the 26 week period ended August 31, 2002, the effective income tax rate was 30.0%, as compared to 35% for the comparable period a year ago. The reduced income tax rate is due to the non-deductibility of officer's life insurance premiums. LIQUIDITY AND CAPITAL RESOURCES Working capital as of August 31, 2002 was $84,054,000, an increase of $2,416,000 as compared to $81,638,000 as of September 1, 2001. The ratio of current assets to current liabilities was 2.73 to 1 as of August 31, 2002 as compared to 2.53 to 1 as of September 1, 2001. Net cash provided by operating activities totaled $8,969,000 for the 26 weeks ended August 31, 2002, as compared to $5,076,000 for the 26 weeks ended September 1, 2001. In the 26 weeks ended August 31, 2002, net cash provided by operating activities was largely impacted by a decrease in merchandise inventories and an increase in accounts payable. Net cash used in investing activities was $4,131,000 for the 26 weeks ended August 31, 2002, as compared to $6,225,000 for the 26 weeks ended September 1, 2001. Expenditures for property and equipment were $2,225,000 and $6,256,000 for the 26 weeks ended August 31, 2002 and September 1, 2001, respectively. The purchase in July 2001 of a shopping center in West Palm Beach, Florida for approximately $5,700,000 accounted for a substantial amount of the expenditures during the last fiscal year. Net cash used in financing activities was $907,000 for the 26 weeks ended August 31, 2002, as compared to $160,000 for the 26 weeks ended September 1, 2001. The Company has a revolving credit agreement with a bank for a line of credit not to exceed $20,000,000 through July 31, 2003. Except for funds provided from this credit agreement, the Company has satisfied its operating and capital expenditure requirements from internally generated funds. As of August 31, 2002 and September 1, 2001, 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 1, 2003. Through the 26 week period ended August 31, 2002, the Company has incurred $2,225,000 of capital expenditures. 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. During the 13 week period ended August 31, 2002, the Company purchased 161,000 shares of common stock, which represented 1.0% of its outstanding shares, at a total cost of $1,168,435. 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 1, 2003. IMPACT OF INFLATION AND CHANGING PRICES Although the Company cannot accurately determine the precise effect of inflation on its operations, it does not believe inflation has had a material effect on sales or results of operations. RECENT ACCOUNTING PRONOUNCEMENTS In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses the accounting and reporting for the impairment or disposal of long-lived assets. The statement provides a single accounting model for long-lived assets to be disposed of. New criteria must be met to classify the asset as an asset held-for-sale. This statement also focuses on reporting the effects of a disposal of a segment of business. This statement is effective for fiscal years 10 ----------------------------- SYMS CORP AND SUBSIDIARIES ----------------------------- beginning after December 15, 2001. The Company has determined that the adoption of SFAS No. 144 will not have a material impact on the Company's financial position or results of operations. In April 2002, SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections" ("SFAS 145") was issued. SFAS 145 rescinds SFAS 4 and 64, which required gains and losses from extinguishment of debt to be classified as extraordinary items. SFAS also rescinds SFAS 44 since the provisions of the Motor Carrier Act of 1980 are complete. SFAS 145 also amends SFAS 13 eliminating inconsistencies in certain sale-leaseback transactions. The provisions of SFAS 145 are effective for fiscal years beginning after May 15, 2002. Any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented shall be reclassified. The Company does not expect that the adoption of SFAS 145 will have a material effect on the Company's financial position or results of operations. SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, was issued in July 2002. SFAS No. 146 replaces current accounting literature and requires the recognition of costs associated with exit or disposal activities when they are incurred rather than at the date of commitment to an exit or disposal plan. The provisions of the Statement are effective for exit or disposal activities that are initiated after December 31, 2002. The Company does not anticipate the adoption of this statement will have a material effect on the Company's financial position or results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's operations are not currently subject to material market risks for interest rates, foreign currency rates or other market price risks. ITEM 4. CONTROLS AND PROCEDURES Based on the evaluation of the Company's disclosure controls and procedures as of a date within 90 days of the filing date of this quarterly 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. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 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 At the annual meeting of shareholders held on July 18, 2002, the Company's shareholders holding a majority of the shares of the Common Stock outstanding as 11 ----------------------------- SYMS CORP AND SUBSIDIARIES ----------------------------- of the close of business on June 14, 2002, voted to approve each of the two proposals included in the Company's proxy statement as follows: To elect six directors to hold office for one year or until successors are duly elected and qualified. FOR WITHHELD ---------- --------- Sy Syms 12,368,405 2,035,246 Marcy Syms 12,368,405 2,035,246 Antone F. Moreira 12,368,405 2,035,246 Harvey A. Weinberg 14,298,931 104,720 David A. Messer 14,298,931 104,720 Wilbur L. Ross, Jr. 14,298,931 104,720 To ratify the selection of Deloitte & Touche LLP as independent auditors of the Company for fiscal 2002: For: 14,362,431 Against: 38,600 Item 5. OTHER INFORMATION - None Item 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibit 10.47 Sixth Amendment to Revolving Credit Agreement and First Amendment to Promissory Note, dated as of August 19, 2002, between Syms Corp and Fleet National Bank 12 ----------------------------- SYMS CORP AND SUBSIDIARIES ----------------------------- 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: OCTOBER 10, 2002 BY /s/Marcy Syms -------------------- ------------------------ MARCY SYMS CHIEF EXECUTIVE OFFICER DATE: OCTOBER 10, 2002 BY /s/ Antone F. Moreira -------------------- ------------------------ ANTONE F. MOREIRA VICE PRESIDENT, CHIEF FINANCIAL OFFICER (Principal Financial and Accounting Officer) 13 ----------------------------- SYMS CORP AND SUBSIDIARIES ----------------------------- I, Marcy Syms, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Syms Corp; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: October 10, 2002 /s/ Marcy Syms ------------------------ Marcy Syms Chief Executive Officer 14 ----------------------------- SYMS CORP AND SUBSIDIARIES ----------------------------- I, Antone F. Moreira, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Syms Corp; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: October 10, 2002 /s/ Antone F. Moreira ------------------------ Antone F. Moreira Chief Financial Officer 15 EX-10.47 3 e90075_ex10-47.txt 6TH AMENDMENT TO REVOLVING CREDIT AGREEMENT EXHIBIT 10.47 SIXTH AMENDMENT TO REVOLVING CREDIT AGREEMENT AND FIRST AMENDMENT TO PROMISSORY NOTE This AMENDMENT is dated as of the 19th day of August, 2002 and is by and between FLEET NATIONAL BANK having an office at 750 Walnut Avenue, Cranford, New Jersey 07016 (the "Bank"), and SYMS CORP, a New Jersey corporation having an address at One Syms Way, Secaucus, New Jersey 07094 (the "Borrower"). WITNESSETH: WHEREAS, the Borrower and the Bank have entered into a Revolving Credit Agreement dated as of December 1, 1993, as amended by that certain First Amendment to Revolving Credit Agreement dated as of November 24, 1997, as further amended by that certain Second Amendment to Revolving Credit Agreement dated as of May 27, 2000, as further amended by that certain Third Amendment to Revolving Credit Agreement dated as of November 25, 2000, and as further amended by that certain Fourth Amendment to Revolving Credit Agreement dated as of May 4, 2001, and as further amended by that certain Fifth Amendment to Revolving Credit Agreement dated as of May 3, 2002 (as amended, the "Credit Agreement"); and WHEREAS, in connection with the Credit Agreement, the Borrower executed a replacement promissory note in favor of the Bank dated May 3, 2002 in the face amount of $20,000,000 (the "Note"); and WHEREAS, the Borrower has requested that the Bank amend, and the Bank has agreed to amend certain provisions of the Agreement and to amend the maturity of the Note. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: 1. Definitions. Except as otherwise defined herein, terms defined in the Credit Agreement shall have the same meaning when used herein. 2. Amendment to Credit Agreement. The Credit Agreement is hereby amended as follows: (a) The definition of "Maturity Date" which appears in Section 1.1 is amended to read as follows: " `Maturity Date' shall mean July 31, 2003". 3. Amendment to Note. The maturity date of the Note is amended by replacing the date "May 2, 2003" the first time it appears with the date "July 31, 2003." 1 4. Representations and Warranties. In order to induce the Bank to enter into this Agreement and amend the Credit Agreement as provided herein, the Borrower hereby represents and warrants to the Bank that: (a) All of the representations and warranties of the Borrower set forth in the Credit Agreement are true, complete and correct in all material respects on and as of the date hereof with the same force and effect as if made on and as of the date hereof and as if set forth at length herein (except that representations and warranties which are expressly stated to be as of a certain date are true, complete and correct in all material respects as of such certain date). (b) No Default or Event of Default presently exists and is continuing on and as of the date hereof. (c) Since the date of the Borrower's most recent financial statements delivered to the Bank, no material adverse change has occurred in the business, assets, liabilities, financial condition or results of operations of the Borrower, and no event has occurred or failed to occur which has had, or reasonably may be expected to have, a material adverse effect on the business, assets, liabilities, financial condition or results of operations of the Borrower. (d) The Borrower has full power and authority to execute, deliver and perform any action or step which may be necessary to carry out the terms of this Agreement and all other agreements, documents and instruments executed and delivered by the Borrower to the Bank concurrently herewith or in connection herewith (collectively, the "Amendment Documents"); each Amendment Document to which the Borrower is a party has been duly executed and delivered by the Borrower and is the legal, valid and binding obligation of the. Borrower enforceable in accordance with its terms, subject to any applicable bankruptcy, insolvency, general equity principles or other similar laws affecting the enforcement of creditor's rights generally. (e) The execution, delivery and performance of the Amendment Documents will not (i) violate any provision of any existing law, statute, rule, regulation or ordinance (ii) conflict with, result in a breach of or constitute a default under (a) any order, judgment, award or decree of any court, governmental authority, bureau or agency, or (b) any mortgage, indenture, lease, contract or other agreement or undertaking to which the Borrower is a party or by which the Borrower or any of its properties or asset~ may be bound, or (iii) result in the creation or imposition of any lien or other encumbrance upon or with respect to any property or asset now owned or hereafter acquired by the Borrower. (f) Except for such filing as may be required under the Securities Exchange Act of 1934, as amended, which filing (if required) shall be made by the Borrower as and when required, no consent, license, permit, approval or authorization of, exemption by, notice to, report to, or registration, filing or declaration with any person is 2 required in connection with the execution, delivery, performance or validity of the Amendment Documents or the transactions contemplated thereby. 5. Bank Costs. The Borrower agrees to reimburse the Bank for all reasonable costs and expenses, including reasonable counsel fees and disbursements, incurred by the Bank in connection with the Amendment Documents and the transactions contemplated therein. If such amounts are not paid within ten days of the Bank's request therefor, the Borrower hereby authorizes the Bank to charge the Borrower's account for the amount of such fees and expenses. 6. No Change. Except as expressly set forth herein, all of the terms and provisions of the Credit Agreement shall continue in full force and effect and are hereby ratified and confirmed in all respects. 7. Counterparts. This Agreement may be executed by the parties hereto in separate counterparts and all such counterparts taken together shall constitute one and the same instrument. 8. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey. IN WITNESS WHEREOF, the Borrower and the Bank have executed this Agreement as of the date above written. FLEET NATIONAL BANK By: /s/ William DiNicola -------------------------------------- Name: William DiNicola Title: Vice President SYMS CORP. Attest: By: /s/ Antone F. Moreira -------------------------------------- Name: Antone F. Moreira Title: Vice President & CFO 3 -----END PRIVACY-ENHANCED MESSAGE-----