Trans World Entertainment last week reported financial results for its fourth quarter and fiscal year 2
006 and despite cost cutting and store closures the picture wasn’t pretty. The company operated an average of 1,087 stores compared to 791 in the previous year and still comparable store sales decreased 6%. Trans World is consolidating the majority of its Coconuts, Strawberries, Wherehouse, Sam Goody and Spec’s stores under f.y.e. (for your entertainment) brand which will lead to more store closures.
If you understand terms like "extraordinary gain for unallocated negative goodwill", there’s a lot more financial info after the jump.
Trans World Entertainment Corporation (NASDAQ:TWMC) reported financial results for its fourth quarter and fiscal year 2006. For the quarter, total sales increased 28% to $586.7 million. The Company operated an average of 1,087 stores compared to an average of 791 stores in the fourth quarter of last year. In addition, the fourth quarter of 2006 contained fourteen weeks compared to thirteen weeks for the fourth quarter of 2005. Comparable store sales for the quarter decreased 6%. For the fourth quarter of 2006, the Company recorded net income of $36.4 million, or $1.12 per diluted share, including an extraordinary gain for unallocated negative goodwill of $3.6 million, net of income taxes, related to the acquisition of Musicland. Income before the extraordinary gain was $32.8 million, or $1.01 per diluted share. Net income for the fourth quarter of 2005, including the cumulative effect of a change in accounting principle related to the adoption of FIN 47, Accounting for Conditional Asset Retirement Obligations, was $20.0 million, or $0.64 per diluted share. Income before the cumulative effect of a change in accounting principle was $22.3 million or $0.71 per diluted share.
For fiscal year 2006, total sales increased 19% to $1.471 billion. The Company operated an average of 1,044 stores compared to 801 during fiscal year 2005. In addition, fiscal year 2006 contained fifty-three weeks compared to fifty-two weeks for fiscal year 2005. Comparable store sales for fiscal year 2006 decreased 6%. Net income for fiscal 2006 was $10.2 million, or $0.32 per diluted share, including an extraordinary gain for unallocated negative goodwill of $8.9 million, net of income taxes, related to the acquisition of Musicland. Income before extraordinary gain was $1.3 million, or $0.04 per diluted share. Net income in 2005 was $0.6 million, or $0.02 per diluted share, including the cumulative effect of a change in accounting principle related to the adoption of FIN 47, Accounting for Conditional Asset Retirement Obligations, of $2.3 million, net of income taxes. Income for fiscal 2005, before the cumulative effect of a change in accounting principle was $2.9 million, or $0.09 per diluted share.
"We were disappointed with our 2006 results," commented Robert J. Higgins, Trans World’s Chairman and CEO. "For 2007, we are committed to improve our operations through strengthening our brand, increasing sales in our core categories, while expanding into other product lines, and improving our selling culture and in-store experience. While we remain cautious in this challenging environment, we also remain optimistic about our transition to be the preferred retailer of all things entertainment."
Trans World Entertainment is a leading specialty retailer of music, video and video games and related products. The Company operates nearly 1,000 retail stores in the United States, the District of Columbia, the U.S. Virgin Islands, and Puerto Rico under various brands. The Company is in the process of consolidating the majority of its stores (Coconuts Music and Movies, Strawberries Music, Wherehouse, Sam Goody and Spec’s) under the name f.y.e. for your entertainment. The Company also operates over 130 video only stores primarily under the Suncoast brand and on the web at www.fye.com, www.coconuts.com, www.wherehouse.com, www.secondspin.com, www.samgoody.com and www.suncoast.com.
Certain statements in this release set forth management’s intentions, plans, beliefs, expectations or predictions of the future based on current facts and analyses. Actual results may differ materially from those indicated in such statements. Additional information on factors that may affect the business and financial results of the Company can be found in filings of the Company with the Securities and Exchange Commission.
TRANS WORLD ENTERTAINMENT CORPORATION
Financial Results
INCOME STATEMENTS:
(in millions, except per share data)
Fourteen and Thirteen
Weeks Ended (1) Fiscal Year Ended (2)
Feb. 3, % to Jan. 28, % to Feb. 3, % to Jan. 28, % to
2007 Sales 2006 Sales 2007 Sales 2006 Sales
Sales $ 586.7 $ 458.6 $1,471.2 $1,238.5
Cost of
sales 382.9 65.3% 307.4 67.0% 952.0 64.7% 806.9 65.1%
Gross
profit 203.8 34.7% 151.2 33.0% 519.2 35.3% 431.6 34.9%
Selling,
general and
admini-
strative
expenses 137.0 23.3% 106.7 23.3% 482.4 32.8% 392.8 31.7%
Depreciation
and
amortization 9.3 1.7% 8.8 1.9% 36.8 2.5% 34.0 2.8%
Income from
operations 57.5 9.7% 35.7 7.8% 0.0 0.0% 4.8 0.4%
Other
income (0.4) -0.1% (0.6) -0.1% (4.4) -0.3% (2.2) -0.2%
Interest
expense 1.4 0.2% 1.0 0.1% 5.5 0.4% 3.0 0.3%
Income (loss)
before income
taxes,
extraordinary
gain –
unallocated
goodwill and
cumulative
effect of
change in
accounting
principle 56.5 9.6% 35.3 7.8% (1.1) -0.1% 4.0 0.3%
Income tax
expense
(benefit) 23.7 4.0% 13.0 2.8% (2.4) -0.2% 1.1 0.1%
Income before
extraordinary
gain –
unallocated
goodwill and
cumulative
effect of
change in
accounting
principle $32.8 5.6% $22.3 5.0% $1.3 0.1% $2.9 0.2%
Extraordinary
gain –
unallocated
negative
goodwill,
net of income
taxes 3.6 0.6% – 0.0% 8.9 0.6% – 0.0%
Cumulative
effect of
change in
accounting
principle,
net of
income taxes – 0.0% (2.3) -0.5% – 0.0% (2.3) -0.2%
Net income $36.4 6.2% $20.0 4.5% $10.2 0.7% $0.6 0.0%
Basic
earnings per
common share:
Earnings per
share before
extraordinary
gain –
unallocated
negative
goodwill
and cumulative
effect of
change in
accounting
principle,
net of income
taxes $1.06 $0.72 $0.04 $0.09
Extraordinary
gain –
unallocated
negative
goodwill,
net of income
taxes 0.12 – 0.29 –
Cumulative
effect of
change in
accounting
principle,
net of
income taxes – (0.07) – (0.07)
Basic earnings
per common
share $1.18 $0.65 $0.33 $ 0.02
Weighted
average
number of
common
shares
outstanding 30.9 30.8 30.8 32.0
Diluted
earnings per
common share:
Earnings per
share before
extraordinary
gain –
unallocated
negative
goodwill
and
cumulative
effect of
change in
accounting
principle,
net of
income
taxes $1.01 $0.71 $0.04 $ 0.09
Extraordinary
gain –
unallocated
negative
goodwill,
net of
income
taxes 0.11 – 0.28 –
Cumulative
effect of
change in
accounting
principle,
net of
income
taxes – (0.07) – (0.07)
Diluted
earnings
per common
share $1.12 $0.64 $0.32 $ 0.02
Weighted
average
number of
common
shares
outstanding 32.4 31.5 32.0 32.1
SELECTED BALANCE
SHEET CAPTIONS:
(in millions, except
store data)
Cash and cash
equivalents $118.6 $197.2
Merchandise
inventory 504.9 402.7
Fixed assets
(net) 138.9 132.5
Accounts payable 311.3 307.7
Long-term debt and
capital lease
obligations, less
current portion 16.1 19.5
Stores in
operation 992 782
(1) – The fourth fiscal quarter ended February 3, 2007 contains 14 weeks.
The fourth fiscal quarter ended January 28, 2006 contains 13 weeks.
(2) – The fiscal year ended February 3, 2007 contains 53 weeks.
The fiscal year ended January 28, 2006 contains 52 weeks.
First Call Analyst:
FCMN Contact: pgau@mww.com
Source: Trans World Entertainment Corporation
CONTACT: John J. Sullivan, EVP, Chief Financial Officer of Trans World Entertainment, +1-518-452-1242; or Rich Tauberman of MWW Group,
+1-201-507-9500, rtauberman@mww.com
Web site: http://www.twec.com/
