Trinity Place Holdings Inc. - Quarter Report: 2005 May (Form 10-Q)

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.

     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 26, 2005. 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

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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 28, 2005 Compared to 13 Weeks Ended May 29, 2004

Net sales for the 13 weeks ended May 28, 2005 were $67,432,000, a decrease of $889,000 (1.3%) as compared to net sales of $68,321,000 for the 13 weeks ended May 29, 2004. The closing of three stores located in Charlotte, NC, Baltimore, MD and Lawrenceville, NJ account for this decline in net sales. On a comparable store basis, sales increased 3.8% for the 13 weeks ended May 28, 2005 as compared to the 13 weeks ended May 29, 2004. In our comparable store computation, we only include stores that have been opened for a period of at least 12 months and stores that were open during both fiscal years. We did not have any relocated stores or expansion in square footage in the 13 weeks ended May 28, 2005 and May 29, 2004.

Gross profit for the 13 weeks ended May 28, 2005 was $28,842,000 (42.8% as a percentage of net sales), an increase of $686,000 as compared to gross profit of $28,156,000 (41.2% as a percentage of net sales) for the fiscal period ended May 29, 2004. This increase in gross profit is mainly the result of lower markdowns in this period compared to the comparable 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 decreased $378,000 to $18,275,000 (27.1% as a percentage of net sales) for the 13 weeks ended May 28, 2005, as compared to $18,653,000 (27.3% as a percentage of net sales) for the 13 weeks ended May 29, 2004. The decrease in expenses is largely due to the closing of three stores which was partially offset by higher expenses in existing stores.

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Advertising expense for the 13 weeks ended May 28, 2005 was $2,835,000 (4.2% as a percentage of net sales) as compared to $2,744,000 (4.0% as a percentage of net sales) for the 13 weeks ended May 29, 2004.

Occupancy costs were $4,041,000 (6.0% as a percentage of net sales) for the 13-week period ended May 28, 2005 as compared to $4,219,000 (6.2% as a percentage of net sales) for the 13 weeks ended May 29, 2004.

Depreciation and amortization amounted to $2,215,000 (3.3% as a percentage of net sales) for the 13 weeks ended May 28, 2005 as compared to $2,609,000 (3.8% as a percentage of net sales) for the 13 weeks ended May 29, 2004. This decline in depreciation expense resulted from certain computer software becoming fully depreciated in fiscal 2004 and the closing of three stores located in Charlotte, NC, Baltimore, MD and Lawrenceville, NJ.

Net income for the 13 weeks ended May 28, 2005 was $1,055,000 as compared to $4,000 for the 13 weeks ended May 29, 2004. The net income improvement for this period resulted principally from improved gross profit margins and lower expenses as compared to the same period last year.

For the 13-week period ended May 28, 2005, the effective income tax rate was 39% compared to 43% for the period ended May 29, 2004.

Liquidity and Capital Resources

Working capital as of May 28, 2005 was $75,726,000, a decrease of $1,400,000, as compared to $77,126,000 as of May 29, 2004. The ratio of current assets to current liabilities was 2.51 to 1 as compared to 2.42 to 1 as of May 29, 2004.

Net cash provided by operating activities totaled $12,104,000 for the 13 weeks ended May 28, 2005, an increase of $1,082,000 as compared to $11,022,000 for the 13 weeks ended May 29, 2004. Net cash used in investment activities was $659,000 for the 13 weeks ended May 28, 2005, as compared to $864,000 for the 13 weeks ended May 29, 2004. Expenditures for property and equipment totaled $659,000 and $864,000 for the 13 weeks ended May 28, 2005 and May 29, 2004, respectively.

Net cash used in financing activities was $16,908,000 for the 13 weeks ended May 28, 2005, as compared to net cash provided by $6,000 for the 13 weeks ended May 29, 2004. This increase resulted principally from a one-time cash dividend declared by the Board of Directors on April 7, 2005 which was paid on May 12, 2005 to shareholders of record as of April 27, 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. The Company is in compliance with all covenants as of May 28, 2005. 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 28, 2005, February 26, 2005 and May 29, 2004, there were no outstanding borrowings under this agreement. At May 28, 2005, February 26, 2005 and May 29, 2004, the Company had $1,764,559, $744,517 and $3,902,000 respectively, in outstanding letters of credit under this new agreement.

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. The Company is not currently using this facility.

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The Company has planned capital expenditures of approximately $5,000,000 for the fiscal year ending February 25, 2006. Through the 13 week period ended May 28, 2005, the Company incurred $659,000 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 28, 2005, the Company purchased 166,000 shares which represented 1.1% of its outstanding shares at a total cost of $2,190,000.

Management believes that existing cash, internally generated funds, trade credit and funds available from the revolving credit agreement will be sufficient for working capital and capital expenditure requirements for the fiscal year ending February 25, 2006.

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 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.

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Part II. Other Information

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Item 1.	LEGAL PROCEEDINGS - None
Item 2.	UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEEDS

Issuer Purchases of Equity Securities

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Period	Total Number	Average Price	Total Number of	Maximum
	of Shares	Paid per Share	Shares Purchased	Number of Shares
	Purchased		as Part of Publicly	that May Yet Be
			Announced Plans	Purchased Under
			or Programs	the Plans or
				Programs (1)
February 27, 2005 -	84,100	13.79	84,100	2,856,300
April 2, 2005
April 3, 2005 –	5,600	13.15	5,600	2,850,700
April 30, 2005
May 1, 2005 - May	76,300	12.54	76,300	2,774,400
28, 2005
Total	166,000	13.19	166,000	2,774,400

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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.

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

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	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:	July 6, 2005		By	/s/ Marcy Syms
				MARCY SYMS
				CHIEF EXECUTIVE OFFICER
Date:	July 6, 2005		By	/s/ Antone F. Moreira
				ANTONE F. MOREIRA
				VICE PRESIDENT, CHIEF FINANCIAL
				OFFICER
				(Principal Financial and Accounting Officer)

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