Trinity Place Holdings Inc. - Quarter Report: 2007 December (Form 10-Q)

          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 March 3, 2007. The Company has identified certain critical accounting policies that are described below.

          Merchandise Inventory - Inventory is stated at the lower of cost of market, FIFO retail method. Inventory cost and the resulting gross margins are calculated by applying a cost to retail ratio between the costs of goods available for sale and the retail value of inventories. The significant estimates used are for markdowns and shrinkage.

          Factors considered in the determination of permanent markdowns include current and anticipated demand, customer preferences, age of the merchandise, fashion trends and weather conditions. In addition, inventory is also evaluated against corporate pre-determined historical markdown trends. When a decision is made to permanently markdown merchandise, the resulting gross margin reduction is recognized in the period the markdown is recorded. The timing of the decision, particularly surrounding the balance sheet date, can have a significant effect on the results of operations.

          Shrinkage is estimated as a percentage of sales for the period from the date of the last physical inventory to the end of the fiscal year. Physical inventories are taken at least annually for all stores and inventory records are adjusted accordingly. The shrinkage rate from the most recent physical inventory, in combination with historical experience, is used as the standard for the shrinkage accrual following the physical inventory.

          The Company has found the use of these estimates to be appropriate and actual results have not differed materially. However, the Company is subject to certain risks and uncertainties that could cause its future estimates to differ materially from past experience.

          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.

Results of Operations

13 and 39 Weeks Ended December 1, 2007 Compared to 13 and 39 Weeks Ended November 25, 2006

Net sales for the 13 weeks ended December 1, 2007 were $70,024,000, a decrease of $2,743,000 (3.8%) as compared to net sales of $72,767,000 for the 13 weeks ended November 25, 2006. For the 39 weeks ended December 1, 2007 net sales decreased $3,088,000 (1.5%) to $198,555,000 as compared to the 39 weeks ended November 25, 2006. Comparable store net sales increased .3% for the 13 weeks ended December 1, 2007 and 2.1% for the 39 weeks as compared to the comparable periods in the prior fiscal year. 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 expansion in square footage in the 39 weeks ended December 1, 2007. The sales decrease in the 13 and 39 weeks ended December 1, 2007 is largely attributable to the closing of three stores located in Monroeville, Pennsylvania, St. Louis, Missouri and Cleveland, Ohio.

Gross profit for the 13 weeks ended December 1, 2007 was $29,548,000, a decrease of $667,000 (42.2% as a percentage of total net sales) as compared to $30,215,000 (41.5% as a percentage of total net sales) for the 13 weeks ended November 25, 2006. Gross profit for the 39 weeks ended December 1, 2007 was $80,368,000, a decrease of $743,000 (40.5% as a percentage of total net sales) as compared to the 39 weeks ended November 25, 2006. The Company’s gross profit may not be comparable to those of other entities, since other entities may include all the

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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. The decline in gross profit dollars in the 13 and 39 week periods is largely the result of lower sales in those periods.

Selling, general and administrative expense was $18,121,000 (25.9% as a percentage of total net sales) for the 13 weeks ended December 1, 2007 as compared to $17,978,000 (24.7% as a percentage of total net sales) for the 13 weeks ended November 25, 2006. Selling, general and administrative expense was $54,307,000 (27.4% as a percentage of total net sales) for the 39 weeks ended December 1, 2007 as compared to $55,117,000 (27.3% as a percentage of total net sales) for the 39 weeks ended November 25, 2006. The decline in expense dollars in the 39 weeks ended December 1, 2007 when compared to the comparable period a year ago, resulted largely from the closing of three stores located in Monroeville, Pennsylvania, St. Louis, Missouri and Cleveland, Ohio.

Advertising expense for the 13 weeks ended December 1, 2007 were $2,813,000 (4.0% as a percentage of total net sales) as compared to $2,976,000 (4.1% as a percentage of total net sales) in the 13 week period ended November 25, 2006. Advertising expense for the 39 weeks ended December 1, 2007 was $6,408,000 (3.2% as a percentage of total net sales) as compared to $7,111,000 (3.5% as a percentage of total net sales) in the 39 week period ended November 25, 2006.

Occupancy costs were $4,404,000 (6.3% as a percentage of total net sales) for the 13 weeks ended December 1, 2007 as compared to $4,237,000 (5.8% as a percentage of total net sales) for the 13 week period ended November 25, 2006. Occupancy costs were $13,129,000 (6.6% as a percentage of total net sales) for the 39 week period ended December 1, 2007 as compared to $13,346,000 (6.6% as a percentage of total net sales) for the 39 week period ended November 25, 2006.

Depreciation and amortization expense was $1,939,000 (2.8% as a percentage of total net sales) for the 13 week period ended December 1, 2007 as compared to $1,983,000 (2.7% as a percentage of total net sales) for the 13 week period ended November 25, 2006. Depreciation and amortization expense for the 39 week period ended December 1, 2007 was $5,723,000 (2.9% as a percentage of total net sales) as compared to $6,221,000 (3.1% as a percentage of total net sales) for the 39 week period ended November 25, 2006.

The results for the 39 weeks ended November 25, 2006 reflects a gain of $10,424,000 resulting from the sale of the Company’s two stores located in Rochester, New York and Dallas, Texas, respectively. These two stores, which closed in May 2006, included the land and building occupied by these two stores.

The net income before income taxes for the 13 weeks ended December 1, 2007 was $2,455,000 as compared to $3,609,000 for the 13 weeks ended November 25, 2006. The net income before taxes for the 39 weeks ended December 1, 2007 was $1,044,000 as compared to $11,466,000 for the 39 weeks ended November 25, 2006. The improvement in net income before taxes for the 39 weeks ended November 25, 2006 resulted largely from the gain on the sale of real estate as noted above.

For the 39 week period ended December 1, 2007 the effective income tax rate was 47.3% as compared to 44.5% for the comparable period a year ago.

Liquidity and Capital Resources

Working capital as of December 1, 2007 was $62,049,000, a decrease of $17,277,000 as compared to $79,326,000 as of November 25, 2006. The ratio of current assets to current liabilities was 2.54 to 1 as of December 1, 2007 as compared to 2.43 to 1 as of November 25, 2006. The purchase of the Westchester property on December 21, 2006 and payment of a dividend in August 2007 accounts for this decline in working capital.

Net cash provided by operating activities totaled $538,000 for the 39 weeks ended December 1, 2007, as compared to $4,038,000 for the 39 weeks ended November 26, 2005. This decline is largely the result of lower store operating profit and higher inventory levels when compared to fiscal year end.

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Net cash used in investment activities was $4,507,000 for the 39 weeks ended December 1, 2007 as compared to net cash provided by investing activities of $12,501,000 for the 39 weeks ended November 25, 2006. Expenditures for property and equipment were $4,524,000 and $3,795,000 for the 39 weeks ended December 1, 2007 and November 25, 2006, respectively. Last year’s investment activities reflect the sale of the Dallas and Rochester properties.

Net cash used in financing activities was $10,301,000 for the 39 weeks ended December 1, 2007, as compared to net cash used in financing activities of $9,817,000 for the 39 weeks ended November 25, 2006. On August 6, 2007, the Company paid a cash dividend to its shareholders of record amounting to $8,820,000.

The Company has a revolving credit agreement with a bank for a line of credit not to exceed $30,000,000 through May 1, 2008. 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 December 1, 2007. 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 December 1, 2007, March 3, 2007 and November 25, 2006, there were no outstanding borrowings under this agreement. At December 1, 2007, March 3, 2007 and November 25, 2006, the Company had $512,837, $955,619 and $829,794 respectively, in outstanding letters of credit under this agreement.

The Company has planned capital expenditures of approximately $5,000,000 for the fiscal year ended March 1, 2008. Through the 39 week period ended December 1, 2007, the Company has incurred $4,524,000 of capital expenditures.

On June 5, 2006, the Company’s Board of Directors approved the repurchase by the Company through June 1, 2008 of up to 2,900,000 shares of common stock at prevailing market prices. All shares repurchased will be held as treasury stock. During the 39 week period ended December 1, 2007, the Company purchased 98,902 shares which represents .5% of its outstanding shares at an approximate cost of $1,480,000.

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 March 1, 2008.

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

Under the supervision and with the participation of our management, including Marcy Syms, the Chief Executive Officer of the Company, and Antone F. Moreira, the Chief Financial Officer of the Company, we have evaluated the effectiveness of our disclosure controls and procedures as required by Rule 13 a-15(b) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that these disclosure controls and procedures are effective. Notwithstanding the foregoing, a control system, no matter how well designed

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and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose information otherwise required to be set forth in the Company’s periodic reports.

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 March 3, 2007, 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 PROCEEDS – None

Issuer Purchases of Equity Securities

	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 (1)		the Plans or
									Programs (1)
	September 2, 2007 –		24,200		$15.45		24,200		2,724,000
	October 6, 2007
	October 7, 2007 –		23,300		$15.47		23,300		2,700,700
	November 3, 2007
	November 4, 2007 –		32,002		$14.30		32,002		2,668,698
	December 1, 2007
	Total		79,502		$14.99		79,502		2,668,698

	(1)	On June 5, 2006, the Company’s Board of Directors approved the repurchase of 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.

Item 3.	DEFAULTS UPON SENIOR SECURITIES - None
Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS – None
Item 5.	OTHER INFORMATION
	In a press release issued by the Company on December 21, 2007, and described in the Form 8-K filed by the Company on the same date with the Securities and Exchange Commission (the "SEC"), the Company announced its intention to terminate the listing of its shares of Common Stock on the New York Stock Exchange and to deregister its securities under the Federal securities laws. Accordingly, on January 2, 2008 the Company filed Form 25 with the SEC and it is anticipated

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	that the delisting and deregistration will become effective on January 14, 2008, thereby suspending the Company's reporting obligations under the Securities Exchange Act of 1934, as amended. Commencing on January 14, 2008 it is anticipated that the Company's securities will be eligible for quotation on the Pink Sheets.
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: January 11, 2008		By:	/s/ Marcy Syms
			MARCY SYMS
			CHIEF EXECUTIVE OFFICER
Date: January 11, 2008		By:	/s/ Antone F. Moreira
			ANTONE F. MOREIRA
			VICE PRESIDENT, CHIEF FINANCIAL OFFICER
			(Principal Financial and Accounting Officer)

 

 

 

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