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UNITED STATES
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, 2006
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 NO. 22-2465228
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
SYMS WAY, SECAUCUS, NEW JERSEY 07094
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (201) 902-9600
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 |_|
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filed" in Rule 12b-2 of the Exchange
Act.
(Check One):
Large Accelerated Filer |_| Accelerated Filer |X| Non-Accelerated Filer |_|
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes |_| No |X|
At June 26, 2006 the latest practicable date, there were 14,518,613
shares outstanding of Common Stock, par value $0.05 per share.
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SYMS CORP AND SUBSIDIARIES
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INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of
May 27, 2006, February 25, 2006 and May 28, 1
Condensed Consolidated Statements of Operations for
the 13 Weeks Ended May 27, 2006 and May 28, 2005 2
Condensed Consolidated Statements of Cash Flows
for the 13 Weeks Ended May 27, 2006 and May 28, 2005 3
Notes to Condensed Consolidated Financial Statements 4-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 11
Item 4. Controls and Procedures 11-12
PART II. OTHER INFORMATION 12-13
Item 1. Legal Proceedings
Item 1a. Risk Factors
Item 2. Unregistered Sales of Equity 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
SIGNATURES 14
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SYMS CORP AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
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(IN THOUSANDS)
MAY 27, FEBRUARY 25, MAY 28,
2006 2006 2005
--------------- ------------- --------------
(UNAUDITED) (NOTE) (UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 56,432 $ 30,007 $ 26,206
Receivables 3,126 2,578 2,536
Merchandise inventories 71,384 57,469 80,564
Deferred income taxes 6,325 6,325 6,382
Assets held for sale - 5,882 4,904
Prepaid expenses and other current assets 4,286 6,056 4,185
--------- --------- ---------
TOTAL CURRENT ASSETS 141,553 108,317 124,777
PROPERTY AND EQUIPMENT - Net 106,676 106,702 111,037
DEFERRED INCOME TAXES 5,511 5,511 7,213
OTHER ASSETS 18,556 18,009 16,351
--------- --------- ---------
TOTAL ASSETS $ 272,296 $ 238,539 $ 259,378
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 37,454 $ 14,916 $ 36,395
Accrued expenses 20,682 7,631 8,876
Accrued insurance 288 313 499
Obligations to customers 3,612 3,625 3,281
--------- --------- ---------
TOTAL CURRENT LIABILITIES 62,036 26,485 49,051
OTHER LONG TERM LIABILITIES 1,496 1,520 1,584
--------- --------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, par value $100 per share. Authorized 1,000
shares; none outstanding. - - -
Common stock, par value $0.05 per share. Authorized 30,000
shares; 14,519 shares outstanding (net of 3,746 in treasury shares)
on May 27, 2006, 14,934 shares outstanding as of February 25, 2006
(net of 3,328 treasury shares) and 14,966 shares outstanding
(net of 3,221 treasury shares) on May 28, 2005 769 769 765
Additional paid-in capital 16,681 16,656 15,804
Treasury stock (37,182) (29,649) (28,203)
Retained earnings 228,496 222,758 220,377
--------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 208,764 210,534 208,743
--------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 272,296 $ 238,539 $ 259,378
========= ========= =========
NOTE: The balance sheet at February 25, 2006 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
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SYMS CORP AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13 WEEKS ENDED
MAY 27, MAY 28,
2006 2005
------- -------
(Unaudited)
Net sales $ 66,193 $67,432
Cost of goods sold 38,482 38,590
-------- -------
Gross profit 27,711 28,842
Expenses:
Selling, general and administrative 18,690 18,275
Advertising 3,051 2,835
Occupancy 4,456 4,041
Depreciation and amortization 2,216 2,215
Other income (160) (10)
-------- -------
Income (loss) from operations (542) 1,486
Gain on sale of real estate (10,424) -
Interest income (444) (244)
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Income before income taxes 10,326 1,730
Provision for income taxes 4,588 675
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Net income $ 5,738 $ 1,055
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Net income per share-basic $ 0.38 $ 0.07
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Weighted average shares outstanding-basic 14,925 15,018
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Net income per share-diluted $ 0.38 $ 0.07
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Weighted average shares outstanding- diluted 15,293 15,282
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See Notes to Condensed Consolidated Financial Statements
2
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(IN THOUSANDS)
13 WEEKS ENDED
MAY 27, MAY 28,
2006 2005
------- -------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,738 $ 1,055
-------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,216 2,215
Deferred income taxes - (1)
Gain on sale of fixed assets (10,432) -
(Increase) decrease in operating assets:
Receivables (548) 117
Merchandising inventories (13,915) (14,440)
Prepaid expenses and other current assets 1,770 1,822
Other assets (531) (404)
Increase (decrease) in operating liabilities:
Accounts payable 22,538 20,898
Accrued expenses 8,502 868
Income taxes 4,511 -
Other long term liabilities (24) (26)
-------- --------
Net cash provided by operating activities 19,825 12,104
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets 16,254 -
Expenditures for property and equipment (2,146) (659)
-------- --------
Net cash provided by (used in) investing activities 14,108 (659)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends - (15,028)
Exercise of options/Issuance of stock 25 310
Purchase of treasury shares (7,533) (2,190)
-------- --------
Net cash (used in) financing activities (7,508) (16,908)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 26,425 (5,463)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 30,007 31,669
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD 56,432 $ 26,206
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 53 $ 31
======== ========
Income taxes paid (refunds received) $ 77 $ (43)
======== ========
See Notes to Condensed Consolidated Financial Statements
3
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13 WEEKS ENDED MAY 27, 2006 AND MAY 28, 2005
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(UNAUDITED)
NOTE 1 - THE COMPANY
Syms Corp (the "Company") operates a chain of 36 "off-price" retail clothing
stores located throughout the United States in the Northeastern and Middle
Atlantic regions and in the Midwest, Southeast and Southwest. Each Syms store
offers a broad range of first quality, in season merchandise bearing nationally
recognized designer or brand-name labels for men, women and children.
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, 2006 are
not necessarily indicative of the results that may be expected for the entire
fiscal year ending March 3, 2007. 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 25,
2006.
NOTE 3 - ACCOUNTING PERIOD
The Company's fiscal year ends the Saturday nearest to the end of February. The
fiscal year ended February 25, 2006 was comprised of 52 weeks. The fiscal year
ending March 3, 2007 will be 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
On November 5, 2003, the Company entered into a revolving credit agreement with
a bank for a line of credit not to exceed $20,000,000 through April 30, 2005.
This agreement has been extended through May 1, 2008 under similar terms and
conditions and the line of credit has been increased from $20,000,000 to
$30,000,000. The agreement contains financial covenants, with respect to
consolidated tangible net worth, as defined as working capital and maximum
capital requirements, including dividends (defined to include cash repurchases
of capital stock), as well as other financial ratios. This agreement was amended
April 20, 2006 by modifying certain financial covenants and other terms and
conditions to allow the Company to repurchase certain amounts of the Company's
outstanding stock. The Company is in compliance with all covenants as of May 27,
2006. Except for funds provided from this revolving credit agreement, the
Company has satisfied its operating and capital expenditure requirements,
including those for the operations and expansion of stores, from internally
generated funds. As of May 27, 2006, February 25, 2006 and May 28, 2005, there
were no outstanding borrowings under this agreement. At May 27, 2006, February
25, 2006 and May 28, 2005, the Company had $1,366,955, $1,189,234 and $1,764,559
respectively, in outstanding letters of credit under this new agreement.
4
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SYMS CORP AND SUBSIDIARIES
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NOTE 6 - NET INCOME PROFIT PER SHARE
In accordance with SFAS 128, basic net income per share has been computed based
upon the weighted average of the common shares outstanding. Diluted net income
per share gives effect to outstanding stock options.
Net income per share has been computed as follows:
13 WEEKS ENDED
MAY 27, MAY 28,
2006 2005
---- ----
Basic net income per share:
Net income $ 5,738 $ 1,055
Average shares outstanding 14,925 15,018
Basic net income per share $ 0.38 $ 0.07
Diluted net income per share:
Net income $ 5,738 $ 1,055
Average shares outstanding 14,925 15,018
Stock options 368 264
--------- ---------
Total average equivalent shares 15,293 15,282
Diluted net income per share $ 0.38 $ 0.07
NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS
In February 2006, the FASB issued Statement of Financial Accounting Standards
No. 155, "Accounting for Certain Hybrid Financial Instruments - an amendment of
FASB Statements No. 133 and 140" which is effective for fiscal years beginning
after September 15, 2006. The statement was issued to clarify the application of
FASB Statement No. 133 to beneficial interests in securitized financial assets
and to improve the consistency of accounting for similar financial instruments,
regardless of the form of the instruments. We have evaluated the new statement
and have determined that it will not have a significant impact on the
determination of our financial results.
In March 2006, the FASB issued Statement of Financial Accounting Standards No.
156, "Accounting for Servicing of Financial Assets - an amendment of FASB
Statement No. 140" which is effective for fiscal years beginning after September
15, 2006. This statement was issued to simplify the accounting for servicing
rights and to reduce the volatility that results from using different
measurement attributes. We have evaluated the new statement and have determined
that it will not have a significant impact on the determination of our financial
results.
NOTE 8 - SHARE BASED COMPENSATION
The Company's Amended and Restated Stock Option and Appreciation Plan allows for
the granting of incentive stock options, as defined in Section 422A of the
Internal Revenue Code of 1986 (as amended), non-qualified stock options or stock
appreciation rights. The plan requires that incentive stock options be granted
at an exercise price not less than the fair market value of the Common Stock on
the date the option is granted. The exercise price of the option for holders of
more than 10% of the voting rights of the Company must be not less than 110% of
the fair market value of the Common Stock on the date of grant. Non-qualified
options and stock appreciation rights may be granted at any exercise price. The
Company has reserved 1,500,000 shares of common stock for issuance thereunder.
The Company is no longer issuing options under its Amended and Restated
Incentive Stock Option and Appreciation Plan.
5
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SYMS CORP AND SUBSIDIARIES
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No option or stock appreciation rights may be granted under the Amended
and Restated Incentive Stock Option Plan after July 28, 2013. The maximum
exercise period for any option or stock appreciation right under the plan is ten
years from the date the option is granted (five years for any optionee who holds
more than 10% of the voting rights of the Company).
On July 14, 2005, at the annual meeting of shareholders of the Company,
the shareholders of the Company approved the 2005 Stock Option Plan (the "2005
Plan"), which 2005 Plan was adopted by the Board of Directors of the Company on
April 7, 2005 subject to shareholder approval. The 2005 Plan permits the grant
of options, share appreciation rights, restricted shares, restricted share
units, performance units, performance shares, cash-based awards and other
share-based awards. Key employees, non-employee directors, and third party
service providers of the Company who are selected by a committee designated by
the Board of Directors of the Company are eligible to participate in the 2005
Plan. The maximum number of shares issuable under the Plan is 850,000, subject
to certain adjustments in the event of changes to the Company's capital
structure.
The 2005 Plan requires that incentive stock options be granted at an
exercise price not less than the fair market value of the Common Stock on the
date the option is granted. The exercise price of such options for holders of
more than 10% of the voting stock of the Company must be not less than 110% of
the fair market value of the Common Stock on the date of grant. The exercise
price of non-qualified options and stock appreciation rights must not be less
than fair market value.
The maximum exercise period for any option or stock appreciation right
under the 2005 Plan is ten years from the date the option is granted (five years
for any incentive stock options issued to a person who holds more than 10% of
the voting stock of the Company).
The 2005 Plan permits the Company to issue restricted shares,
restricted share units, performance units, cash-based awards and other
share-based awards with such term and conditions (including applicable vesting
conditions) as the Company shall determine, subject to certain terms and
conditions set forth in the 2005 Plan.
Effective February 25, 2006, the Company adopted the provisions of FAS
No. 123(R), "Share-Based Payment" ("FAS123(R)"). Under FAS123(R), share-based
compensation cost is measured at grant date, based on the estimated fair value
of the award, and is recognized as expense over the requisite service period.
The Company adopted the provisions of FAS123(R) using a modified prospective
application. Under this method, compensation cost is recognized for all
share-based payments granted, modified or settled after the date of adoption, as
well as for any unvested awards that were granted prior to the date of adoption.
Prior periods are not revised for comparative purposes. Because the Company
previously adopted only the pro forma disclosure provisions of SFAS 123, it will
recognize compensation cost relating to the unvested portion of awards granted
prior to the date of adoption using the same estimate of the grant-date fair
value and the same attribution method used to determine the pro forma
disclosures under SFAS 123, except that forfeitures rates will be estimated for
all options, as required by FAS123(R).
The fair value of each option award is estimated on the date of grant
using a Black-Scholes option valuation model. Expected volatility is based on
the historical volatility of the price of the Company's stock. The risk-free
interest rate is based on U.S. Treasury issues with a term equal to the expected
life of the option. The Company uses historical data to estimate expected
dividend yield, expected life and forfeiture rates. There were no options
granted during the three months ended May 27, 2006, and all options previously
issued are fully vested.
6
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SYMS CORP AND SUBSIDIARIES
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Stock option activity during the three months ended May 27, 2006 is as follows:
(In thousands, except per share amounts)
Weighted
Weighted Average
Average Remaining Aggregate
Number Exercise Contracted Intrinsic
of Options Price Term (Years) Value
---------- -------- ------------ ---------
Outstanding at February 25, 2006 739 $8.08 - -
Options granted - - - -
Options exercised (4) 7.41 - -
Options forfeited - - - -
Options outstanding at May 27, 2006 735 $8.09 3.72 $7,290
Options exercisable at May 27, 2006 735 $8.09 3.72 $7,290
As of May 27, 2006, there was no total unrecognized stock-based
compensation cost related to options granted under our plans that will be
recognized in future periods.
Awards granted prior to the adoption of FAS 123(R) were accounted for
under the provisions of Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25"), and its related interpretations.
Under this intrinsic value method there was no compensation expense recognized
for the three month period ended May 28, 2005 because all options had exercise
prices equal to the market value of the underlying stock on the date of grant.
The following table illustrates the effect on net income and net income per
common share if the fair value method had been applied (in thousands except per
share amounts):
13 WEEKS
ENDED
5/28/05
------------
Net income: $ 1,055
Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects -
------------
Pro forma net income $ 1,055
============
Earnings per share: $0.07
Basic, as reported $0.07
Basic, pro forma -
Diluted, as reported $0.07
Diluted, pro forma -
This pro forma information may not be representative of the amounts to
expected in future years as the fair value method of accounting prescribed by
SFAS No. 123 has not been applied to options granted prior to fiscal 1996.
7
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SYMS CORP AND SUBSIDIARIES
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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 (within the meaning of Sections
27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of
1934) and information relating to the Company that are based on the beliefs of
the management of the Company as well as assumptions made by and information
currently available to the management of the Company. When used in this
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 herein as anticipated, believed, estimated,
expected, intended or planned. Subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the cautionary statements in this
paragraph and elsewhere described in this 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 accounting
principles generally accepted in the United States of America requires the
appropriate application of certain accounting policies, many of which require us
to make estimates and assumptions about future events and their impact on
amounts reported in the financial statements and related notes. Since future
events and their impact cannot be determined with certainty, the actual results
will inevitably differ from our estimates. Such differences could be material to
the consolidated financial statements.
The Company believes application of accounting policies, and the estimates
inherently required by the policies, are reasonable. These accounting policies
and estimates are constantly reevaluated, and adjustments are made when facts
and circumstances dictate a change. Historically, the Company has found the
application of accounting policies to be appropriate, and actual results have
not differed materially from those determined using necessary estimates.
The Company's accounting policies are more fully described in Note 1 to the
Consolidated Financial Statements, located in the Annual Report on Form 10-K for
the fiscal year ended February 25, 2006. 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
8
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SYMS CORP AND SUBSIDIARIES
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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 a carrying value at the lower of cost or market. If actual market conditions
are less favorable than those projected by management, additional markdowns may
be required.
LONG-LIVED ASSETS - In evaluation of the fair value and future benefits of
long-lived assets, the Company performs 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 not likely 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 the Company's net deferred tax
asset in the future, an adjustment to the deferred tax asset would be charged to
income in the period such determination was made.
SELF-INSURANCE ACCRUALS - The Company had been self-insured for workers'
compensation liability claims. The Company is responsible for the payment of
claims from prior years. In estimating the obligation associated with incurred
losses, the Company utilizes loss development factors. These development factors
utilize historical data to project incurred losses. Loss estimates are adjusted
based upon actual claims settlements and reported claims.
RESULTS OF OPERATIONS
13 WEEKS ENDED MAY 27, 2006 COMPARED TO 13 WEEKS ENDED MAY 28, 2005
Net sales for the 13 weeks ended May 27, 2006 were $66,193,000, a decrease of
$1,239,000 (1.8%) as compared to net sales of $67,432,000 for the 13 weeks ended
May 28, 2005. This decline was concentrated mainly in the ladies apparel area.
On a comparable store basis, sales decreased 1.8% for the 13 weeks ended May 27,
2006 as compared to the 13 weeks ended May 28, 2005. In our comparable store
computation, we only include stores that have been open for a period of at least
12 months and stores that were open during both fiscal years. We did not have
any expansion in square footage in the 13 weeks ended May 27, 2006 and May 28,
2005.
Gross profit for the 13 weeks ended May 27, 2006 was $27,711,000 (41.9% as a
percentage of net sales), a decrease of $1,131,000 as compared to gross profit
of $28,842,000 (42.8% as a percentage of net sales) for the fiscal period ended
May 28, 2005. This decrease in gross profit is largely attributable to lower
sales and higher markdowns in this period compared to the same period a year
ago. The Company's gross profit may not be comparable to those of other
entities, since other entities may include all of the costs related to their
distribution network in cost of goods sold and others, like the Company, exclude
a portion of those costs from gross profit and, instead, include them in other
line items, such as selling and administrative expenses and occupancy costs.
Selling, general and administrative expense was $18,690,000 (28.2% as a
percentage of net sales) for the 13 weeks ended May 27, 2006 as compared to
$18,275,000 (27.1% as a percentage of net sales) for the 13 weeks ended May 28,
2005. This increase is largely attributable to higher payroll, health and
pension benefits in the existing stores.
9
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SYMS CORP AND SUBSIDIARIES
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Advertising expense for the 13 weeks ended May 27, 2006 was $3,051,000 (4.6% as
a percentage of net sales) as compared to $2,835,000 (4.2% as a percentage of
net sales) for the 13 weeks ended May 28, 2005.
Occupancy costs were $4,456,000 (6.7% as a percentage of net sales) for the
13-week period ended May 27, 2006 as compared to $4,041,000 (6.0% as a
percentage of net sales) for the 13 weeks ended May 28, 2005.
Depreciation and amortization amounted to $2,216,000 (3.3% as a percentage of
net sales) for the 13 weeks ended May 27, 2006 as compared to $2,215,000 (3.3%
as a percentage of net sales) for the 13 weeks ended May 28, 2005.
The Company recorded a gain of $10,424,000 resulting from the sale of its two
stores located in Rochester, New York and Dallas, Texas. These two stores which
closed in May 2006 included the land and buildings occupied by these stores. The
Dallas store was replaced by a store located in Plano, Texas which opened in May
2006 and is a leased property.
Net income before tax for the 13 weeks ended May 27, 2006 was $10,326,000 as
compared to $1,730,000 for the 13 weeks ended May 28, 2005. Without the gain on
the sale of real estate of $10,424,000, the Company had a net loss before taxes
of $98,000 for the 13 weeks ended May 27, 2006.
For the 13-week period ended May 27, 2006, the effective income tax rate was
44.4% compared to 39% for the period ended May 28, 2005.
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of May 27, 2006 was $79,517,000, an increase of $3,791,000,
as compared to $75,726,000 as of May 28, 2005. The ratio of current assets to
current liabilities was 2.28 to 1 as compared to 2.51 to 1 as of May 28, 2005.
Net cash provided by operating activities totaled $19,825,000 for the 13 weeks
ended May 27, 2006, an increase of $7,721,000 as compared to $12,104,000 for the
13 weeks ended May 28, 2005. This increase resulted principally from the sale of
real estate in Rochester, New York and Dallas, Texas. Net cash provided by
investment activities was $14,108,000 for the 13 weeks ended May 27, 2006, as
compared to net cash used in operating activities of $659,000 for the 13 weeks
ended May 28, 2005. Expenditures for property and equipment totaled $2,146,000
and $659,000 for the 13 weeks ended May 27, 2006 and May 28, 2005, respectively.
Net cash used in financing activities was $7,508,000 for the 13 weeks ended May
27, 2006, as compared to 16,908,000 for the 13 weeks ended May 28, 2005. The 13
weeks ended May 27, 2006 represent the purchase of treasury shares (418,474 @
$18 per share) as compared to a one-time cash dividend of $15,028,000 declared
by the Board of Directors in the 13 weeks ended May 28, 2005.
On November 5, 2003, the Company entered into a revolving credit agreement with
a bank for a line of credit not to exceed $20,000,000 through April 30, 2005.
This agreement has been extended through May 1, 2008 under similar terms and
conditions and the line of credit has been increased from $20,000,000 to
$30,000,000. The agreement contains financial covenants, with respect to
consolidated tangible net worth, as defined as working capital and maximum
capital requirements, including dividends (defined to include cash repurchases
of capital stock), as well as other financial ratios. This agreement was amended
April 20, 2006 by modifying certain financial covenants and other terms and
conditions to allow the Company to repurchase certain amounts of the Company's
outstanding stock. The Company is in compliance with all covenants as of May 27,
2006. Except for funds provided from this revolving credit agreement, the
Company has satisfied its operating and capital expenditure requirements,
including those for the operations
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SYMS CORP AND SUBSIDIARIES
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and expansion of stores, from internally generated funds. As of May 27, 2006,
February 25, 2006 and May 28, 2005, there were no outstanding borrowings under
this agreement. At May 27, 2006, February 25, 2006 and May 28, 2005, the Company
had $1,366,955, $1,189,234 and $1,764,559 respectively, in outstanding letters
of credit under this new agreement.
The Company has planned capital expenditures of approximately $5,000,000 for the
fiscal year ending March 3, 2007. Through the 13 week period ended May 27, 2006,
the Company incurred $2,146,000 of capital expenditures.
On April 22, 2004, the Company's Board of Directors approved the repurchase by
the Company through June 7, 2006 of up to an additional 3,100,000 shares of
common stock at prevailing market prices. All shares repurchased will be held as
treasury stock. During the 13 weeks ended May 27, 2006, the Company did not
purchase any shares. On June 5, 2006 the Board of Directors authorized the
Company to repurchase an aggregate of up to 20% (not to exceed 2,900,000 shares)
of its outstanding shares of Common Stock during the next 24 months expiring on
June 5, 2008.
On April 27, 2006 the Company's Board of Directors authorized the repurchase of
up to 3,350,000 shares of its common stock through a "Dutch Auction" self-tender
offer at a price per share not less than $16.00 and not greater than $18.00.
This tender offer commenced on April 28, 2006 at 5 p.m. Based on the final count
by American Stock Transfer & Trust Company, the depository for the offer,
418,474 shares were tendered at a per share price of $18 for a total cost of
$7,533,000. The Company did not have to draw down under its credit facilities to
purchase these shares because it had sufficient cash on hand.
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, 2007.
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
See Note 7 of the Consolidated Financial Statements for a full description of
the Recent Accounting Pronouncements including the respective dates of adoption
and the effects on Results of Operation and Financial Condition.
ITEM 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
(a) Evaluation of Disclosure Controls and Procedures
Based on the evaluation of the Company's disclosure controls and procedures as
of the end of the period covered by this 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, (the "Exchange Act") is
recorded, processed, summarized and reported, within the time period specified
by
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SYMS CORP AND SUBSIDIARIES
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the Securities and Exchange Commission's rules and forms. Notwithstanding the
foregoing, a control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that it will detect or uncover
failures within the Company to disclose material information otherwise required
to be set forth in the Company's periodic reports.
(b) Internal Control Over Financial Reporting
There have not been any changes in the Company's internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the Company's most recent completed fiscal quarter that
have materially affected, or are reasonably likely to materially affect the
Company's internal control over financial reporting.
PART II. OTHER INFORMATION
--------------------------------------------------------------------------------
Item 1. LEGAL PROCEEDINGS - None
Item 1a. RISK FACTORS
In addition to the other information set forth in this report, you
should carefully consider the factors discussed in Part I "Item 1A.
Risk Factors" in our Annual Report on Form 10- K for the year ended
February 25, 2006, which could materially affect our business,
financial condition or future results. The risks described in our
Annual Report on Form 10-K are not the only risks facing our
Company. Additional risks and uncertainties not currently known to
us or that we currently deem to be immaterial may also materially
adversely affect our business, financial condition and/or operating
results.
Item 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEEDS
Issuer Purchases of Equity Securities
---------------------------------------------------------------------------------------------------------------
Period Total Number of Average Price Paid Total Number of Maximum Number
Shares Purchased per Share Shares Purchased of Shares that May
(1)(2) as Part of Publicly Yet Be Purchased
Announced Plans Under the Plans or
or Programs Programs (1)(2)(3)
---------------------------------------------------------------------------------------------------------------
Feb . 26, 2006 - 0 N/A 0 2,667,000
April 1, 2006
---------------------------------------------------------------------------------------------------------------
April 2, 2006 - 0 N/A 0 2,667,000
April 29, 2006
---------------------------------------------------------------------------------------------------------------
April 30, 2006 - 418,474 $18.00 418,474 2,667,000
May 27, 2006
---------------------------------------------------------------------------------------------------------------
Total 418,474 $18.00 418,474 2,667,000
---------------------------------------------------------------------------------------------------------------
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(1) On April 22, 2004, the Company's Board of Directors approved the repurchase
of up to an additional 3,100,000 shares of common stock at prevailing market
prices through June 7, 2006. All shares repurchased will be held as treasury
stock. During the fiscal quarter ending May 27, 2006 the Company had remaining
authorization to purchase approximately 2,667,000 shares of its common stock.
The Company did not purchase any shares under this plan during such period.
(2) On April 27, 2006, the Company's Board of Directors authorized the
repurchase of up to 3,350,000 shares of its common stock through a "Dutch
Auction" self-tender offer at a price per share not less than $16.00 and not
greater than $18.00. This tender offer commenced on April 28, 2006 at 5 p.m.
Based on the final count by American Stock Transfer & Trust Company, the
depository for the offer, 418,474 shares were tendered at a per share price of
$18 for a total cost of $7,533,000 as of May 26, 2006.
(3) As previously disclosed, on June 5, 2006 the Board of Directors authorized
the Company to repurchase an aggregate of up to 20% (not to exceed 2,900,000
shares) of its outstanding shares of common stock during the 24 month period
expiring on June 5, 2008.
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
Exhibits filed with this Form 10-Q
31.1 Certification of Chief Executive Officer pursuant
to Rule 13a-14(a) under the Securities and
Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant
to Rule 13a-14(a) under the Securities and
Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant
to Rule 13a-14(b) under the Securities and
Exchange Act of 1934, and 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant
to Rule 13a-14(b) under the Securities and
Exchange Act of 1934, and 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
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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: June 29, 2006 BY /s/ MARCY SYMS
--------------
MARCY SYMS
CHIEF EXECUTIVE OFFICER
DATE: June 29, 2006 BY /s/ ANTONE F. MOREIRA
---------------------
ANTONE F.MOREIRA
VICE PRESIDENT, CHIEF FINANCIAL
OFFICER
(Principal Financial and Accounting Officer)
14