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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 3, 1995
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TRANS WORLD ENTERTAINMENT CORPORATION
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(Exact name of registrant as specified in its charter)
New York 0-14818 14-1541629
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
38 Corporate Circle, Albany, New York 12203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (518) 452-1242
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Item 5. Other Events
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The Registrant announced three principal developments: (a) a store closing
charge for its fiscal quarter ending January 28, 1995, equal to, on a pre-
tax basis, approximately $21,000,000; (b) a forecasted net loss, after the
store closing charge, for the fiscal year ending January 28, 1995, ranging
from $.65 to $.75 per share; and (c) a default and accompanying temporary
waiver of two covenant tests under the Registrant's senior credit
facilities, all as more fully set forth in the Press Release, dated
February 2, 1995 (the "Press Release") issued by the Registrant. The
description herein is qualified in its entirety by reference to the full
text of the Press Release filed as Exhibit 99 hereto and incorporated
herein by reference.
Item 7. Financial Statements and Exhibits
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(c) Exhibits Page No.
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99 Press Release, dated February 2, 1995 issued 3
by Trans World Entertainment Corporation.
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.
TRANS WORLD ENTERTAINMENT
CORPORATION
February 3, 1995 By: /s/ ROBERT A. HELPERT
________________ _____________________________
Date Robert A. Helpert
Executive Vice President and
Chief Administrative Officer
(Duly authorized officer)
February 3, 1995 By: /s/ JOHN J. SULLIVAN
________________ _____________________________
Date John J. Sullivan
Vice President - Finance
(Chief Accounting Officer)
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EXHIBIT 99
FROM: TRANS WORLD ENTERTAINMENT CORPORATION
38 Corporate Circle
Albany, NY 12203
MWW/Strategic Communications, Inc.
Public Relations - Tel. (201) 507-9500
Contact: Michael W. Kempner / Michael T. Lennon
FOR IMMEDIATE RELEASE
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TRANS WORLD ENTERTAINMENT CORPORATION ANNOUNCES PLANS TO STREAMLINE
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OPERATIONS
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Leading Music/Video Retailer to Close Underperforming Stores and Restructure
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Debt; Will Focus on Strong Markets and Larger Stores
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ALBANY, NY, February 2, 1995 -- Trans World Entertainment Corporation
(NASDAQ:TWMC) today announced that it will close 129 underperforming stores
and will relocate 14 others to streamline operations and increase
profitability. After the store closings, Trans World Entertainment will
continue to be a nationwide retailer with over 570 music and video locations
and significantly improved inventory management and merchandising programs.
Robert J. Higgins, Chairman and Chief Executive Officer said, "The
majority of our stores are profitable, and we anticipate that they will
continue to be solid performers. However, to remain strong and build for the
future, we are undertaking a series of initiatives to ensure our continued
market leadership, including closing unprofitable stores. We expect these
actions to improve our profitability and cash flow. The planned store
closings are location-specific and Trans World Entertainment will not exit
any of the geographic markets it currently serves."
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In recent months, the Company has made several strategic moves to
improve profitability. The Company has developed a strong merchandising team,
including the recent addition of Senior Vice President John Whitehead. Since
arriving in October, Whitehead has already begun to modify the Company's
product mix and merchandising strategies to improve revenues and profit
margins.
In addition, the new merchandise replenishment system functioned well
during the 1994 holiday season, helping to generate increased comparable
store sales.
As part of its future plans, the Company intends to expand the square
footage of many of its successful stores to accommodate consumers' preference
for one-stop audio and video entertainment shopping.
The Company will work to minimize the impact of the store closings on
its employees. "Because our employees have been such an important part of our
growth, we will work to place as many of our associates as possible in other
stores within the Company," Higgins said.
As a result of the store closings, the Company will take a pre-tax
charge of approximately $21 million in the fourth quarter of the fiscal year
ending January 28, 1995. Approximately $11.5 million of the store closing
charge is the non-cash write off of the related store assets. After these
charges, the Company's shareholders' equity will be approximately $120
million.
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The Company currently forecasts net income for the fourth quarter of
fiscal 1994, before the impact of the store closing charge, of $1.35 to $1.45
per share, compared to $1.41 per share for the comparable period of 1993.
The $21 million store closing charge, after income taxes, will reduce the
fourth quarter profit by approximately $12.5 million, or $1.30 per share.
For the full year, the store closing charge will cause the Company to record
a net loss ranging between $.65 to $.75 per share. 1994 cash flow, as
measured by earnings before interest, taxes, depreciation and amortization
("EBITDA"), remained strong at approximately $37 million, the same level of
EBITDA for fiscal 1993.
Operating losses from the underperforming stores being closed had an
estimated negative impact on 1994 earnings of approximately $.35 per share.
The Company expects to realize significant benefits from the elimination of
the operating losses associated with these stores as scheduled closings are
completed throughout 1995 and 1996. Working capital generated from the store
closings will be redeployed into the Company's other operations.
As a result of the store closing charge and recent operating results,
the Company is in default of two covenant tests contained in its senior
credit facilities as of January 28, 1995, its fiscal year end. The debt
facilities include the aggregate principal amount of $75,000,000 outstanding
under its revolving credit facilities and $65,000,000 in senior unsecured
notes. The Company has obtained temporary waivers from all its senior
lenders, effective through March 31, 1995. In obtaining the waivers, the
Company agreed to an increase in the applicable interest rates.
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The Company is working with the lenders in its bank and noteholder
groups to restructure the applicable credit facilities, to take into account
recent and forecasted operating results and the planned closing of
underperforming stores. There can be no assurance that an agreement will be
reached with the Company's senior lenders. Any restructuring of the
agreements would likely result in higher interest rates and additional
covenant restrictions.
Trans World Entertainment Corporation is one of the nation's largest
specialty retailers of prerecorded music and video products, operating under
several names, including Record Town, Music World, Tape World, For Your
Entertainment, Saturday Matinee and Coconuts Music & Movies.
