Exhibit-99.1

 

Contact:

Trans World Entertainment

Ed Sapienza

Chief Financial Officer

(518) 452-1242

Contact:

Financial Relations Board

Marilynn Meek

(mmeek@frbir.com)

(212) 827-3773

     
38 Corporate Circle    
Albany, NY 12203    
     
www.twec.com     NEWS RELEASE  
     

 

TRANS WORLD ENTERTAINMENT ANNOUNCES THIRD QUARTER RESULTS

 

Albany, NY, December 17, 2019-- Trans World Entertainment Corporation (Nasdaq: TWMC) today reported financial results for its third quarter ended November 2, 2019.

 

Third Quarter Overview - Consolidated

 

Total revenue decreased 24.5% to $69.5 million compared to $92.0 million in the third quarter of fiscal 2018.
   
Loss from operations was $22.9 million compared to a loss from operations of $13.8 million for the third quarter of fiscal 2018.
   
Net loss was $23.2 million, or $12.73 per share, for the 13 weeks ended November 2, 2019, compared to a net loss of $14.1 million, or $7.74 per share, for the same period last year (see note 1). Included in the third quarter 2019 operating results were non-cash charges due to impairment of certain long lived assets in the amount of $16.0 million.
   
Adjusted EBITDA (a non-GAAP measure) was a loss of $5.7 million compared to a loss of $10.7 million for the third quarter of fiscal 2018 (see note 2).

 

Thirty-nine weeks ended November 2, 2019 Overview – Consolidated

 

Total revenue for the thirty-nine weeks ended November 2, 2019 decreased 22.4% to $225.6 million, compared to $290.8 million for the same period last year.
   
Loss from operations was $37.9 million compared to a loss from operations of $31.3 million for the thirty-nine weeks ended November 3, 2018.
   
Net loss was $39.1 million, or $21.51 per share, for the thirty-nine weeks ended November 2, 2019, compared to a net loss of $31.7 million, or $17.48 per share, for the same period last year (see note 1). Included in the operating results were non-cash charges due to impairment of certain long lived assets in the amount of $16.0 million.
   
Adjusted EBITDA (a non-GAAP measure) was a loss of $18.7 million compared to a loss of $21.5 million for the third quarter of fiscal 2018 (see note 2).
 
Cash used in operations during the thirty-nine weeks ended November 2, 2019 was $30.8 million compared to $53.3 million for the same period last year, an improvement of $22.5 million.
   
Cash, cash equivalents and restricted cash as of November 2, 2019 was $9.2 million, compared to $14.6 million as of November 3, 2018.
   
Inventory was $101.1 million at the end of third quarter of 2019 as compared to $131.3 million at the end of the third quarter of 2018.
   
Borrowings under the credit facility at the end of the third quarter were $27.8 million as compared to $27.4 million at the end of the third quarter last year. As of November 2, 2019, $11.0 million was available for borrowing.
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Segment Highlights

 

   Thirteen Weeks Ended   Thirty-nine Weeks Ended 
(amounts in thousands)  November 2,
2019
   November 3,
2018
   November 2,
2019
   November 3,
2018
 
                     
Total Revenue                    
fye  $40,840   $47,865   $127,602   $152,473 
etailz   28,616    44,119    98,008    138,288 
Total Company  $69,456   $91,984   $225,610   $290,761 
                     
Gross Profit                    
fye  $16,155   $18,276   $50,670   $61,181 
etailz   6,924    9,110    22,915    30,066 
Total Company  $23,079   $27,386   $73,585   $91,247 
                     
SG&A                    
fye  $21,012   $26,620   $67,094   $79,214 
etailz   7,812    12,217    25,180    36,528 
Total Company  $28,824   $38,837   $92,274   $115,742 
Loss From Operations                    
fye  $(21,524)  $(9,493)  $(34,280)  $(21,495)
etailz   (1,353)   (4,261)   (3,640)   (9,808)
Total Company  $(22,877)  $(13,754)  $(37,920)  $(31,303)
                     
Reconciliation of etailz Loss from Operations to etailz Adjusted Loss From Operations      
etailz loss from operations  $(1,353)  $(4,261)  $(3,640)  $(9,808)
Acquisition related amortization expense   286    972    858    2,915 
Acquisition related compensation expense, net of contingency benefit   -    750    66    2,991 
etailz adjusted loss from operations  $(1,067)  $(2,539)  $(2,716)  $(3,902)
                     
Reconciliation of fye Loss From Operations to fye Adjusted Loss From Operations      
fye Loss From Operations  $(21,524)  $(9,493)  $(34,280)  $(21,495)
Asset impairment charges   16,035    -    16,035    - 
fye Adjusted Loss From Operations  $(5,489)  $(9,493)  $(18,245)  $(21,495)

 

Third Quarter Overview - etailz

 

Revenue for the third quarter was $28.6 million, compared to $44.1 million for the same period last year. The decline in revenue was due to the vendor rationalization and remediation initiative. Rationalization and remediation activities included terminating unprofitable vendors and improving vendor relationships through negotiations focused on improvements to gross margins and supply chain efficiencies.
   
Gross profit for the third quarter was $6.9 million, or 24.2% of revenue, as compared to $9.1 million, or 20.6% of revenue, for the same period last year.
   
Selling, general and administrative (“SG&A”) expenses for the third quarter were $7.8 million, or 27.3% of revenue, compared to $12.2 million, or 27.7% of revenue, for the
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  same period last year. The decline in SG&A expenses was due to expense reduction initiatives implemented in the fourth quarter of fiscal 2018.
   
etailz loss from operations was $1.4 million for the third quarter versus $4.3 million for the same period last year.
   
etailz adjusted loss from operations (a non-GAAP measure) was $1.1 million for the third quarter of fiscal 2019 as compared to $2.5 million for the third quarter of fiscal 2018 (see note 2).

 

Thirty-nine weeks ended November 2, 2019 Overview – etailz

 

Revenue for the thirty-nine weeks ended November 2, 2019 was $98.0 million compared to $138.3 million for the same period last year.
   
Gross profit for the thirty-nine weeks ended November 2, 2019 was $22.9 million, or 23.4% of revenue, compared to $30.1 million, or 21.7% of revenue, for the same period last year.
   
SG&A expenses for the thirty-nine weeks ended November 2, 2019 were $25.2 million, or 25.7% of revenue, compared to $36.5 million, or 26.5% of revenue, for the same period last year.
   
etailz adjusted loss from operations (a non-GAAP measure) was $2.7 million for the thirty-nine weeks ended November 2, 2019 compared to a loss of $3.9 million for the same period last year (see note 2).

 

Third Quarter Overview - fye

 

For the quarter ended November 2, 2019, revenue decreased 14.7% to $40.8 million, compared to $47.9 million for the same period last year. Comparable store sales were down 5.2% compared to the same quarter last year, as a comparable store sales increase of 6.3% in the lifestyle category was offset by declines in the media categories. The lifestyle category represented 46.2% of revenue for the quarter as compared to 41.9% for the same period last year.
   
Gross profit for the third quarter was $16.2 million, or 39.6% of revenue, compared to $18.3 million, or 38.2% of revenue, for the same period last year.
   
SG&A expenses decreased $5.6 million, or 21.1%, for the third quarter to $21.0 million, or 51.4% of revenue, compared to $26.6 million, or 55.6% of revenue, for the same period last year. The decline in SG&A expenses was due to fewer stores in operation.
   
The fye segment recorded an operating loss of $21.5 million for the 13 weeks ended November 2, 2019, compared to an operating loss of $9.5 million for same period last
4
  year. Included in the operating results were non-cash charges due to impairment of certain long lived assets in the amount of $16.0 million.
   
As of November 2, 2019, fye segment inventory was $69 per square foot as compared to $76 per square foot as of November 3, 2018.

 

Thirty-nine weeks ended November 2, 2019 Overview – fye

 

For the thirty-nine weeks ended November 2, 2019, revenue decreased 16.3% to $127.6 million, compared to $152.5 million for the same period last year.
   
Gross profit for the thirty-nine weeks ended November 2, 2019 was $50.7 million, or 39.7% of revenue, compared to $61.2 million, or 40.1% of revenue, for the same period last year.
   
For the thirty-nine weeks ended November 2, 2019, SG&A expenses decreased $12.1 million, or 15.3%, to $67.1 million compared to $79.2 million in the comparable period last year. As a percentage of revenue, SG&A expenses were 52.6% versus 52.0% for the same period last year. The decline in SG&A expenses was due to fewer stores in operation.
   
The fye segment recorded an operating loss of $34.3 million for the thirty-nine weeks ended November 2, 2019, compared to an operating loss of $21.5 million for same period last year. Included in the operating results were non-cash charges due to impairment of certain long lived assets in the amount of $16.0 million.
5

TRANS WORLD ENTERTAINMENT CORPORATION

Condensed Consolidated Financial Results

 

STATEMENTS OF OPERATIONS:

(in thousands, except per share data)

 

   Thirteen Weeks Ended   Thirty-nine Weeks Ended 
   November 2,
2019
   % to
Revenue
   November 3,
2018
   % to
Revenue
   November 2,
2019
   % to
Revenue
   November 3,
2018
   % to
Revenue
 
                                 
Net sales  $68,592        $90,877        $223,100        $287,148      
Other revenue   864         1,107         2,510         3,613      
Total revenue  $69,456        $91,984        $225,610        $290,761      
                                         
Cost of sales   46,377    66.8%   64,598    70.2%   152,025    67.4%   199,514    68.6%
Gross profit   23,079    33.2%   27,386    29.8%   73,585    32.6%   91,247    31.4%
Selling, general and administrative expenses   28,824    41.5%   38,087    41.4%   92,274    40.9%   112,751    38.8%
Asset Impairment charges   16,035    23.1%   -    0.0%   16,035    7.1%   -    0.0%
Acquisition related compensation expenses   -    0.0%   750    0.8%   66    0.0%   2,991    1.0%
Depreciation and amortization expenses   1,097    1.6%   2,303    2.5%   3,130    1.4%   6,808    2.3%
Loss from operations   (22,877)   -32.9%   (13,754)   -15.0%   (37,920)   -16.8%   (31,303)   -10.8%
                                         
Interest expense   228    0.3%   277    0.3%   554    0.2%   444    0.2%
Other (income) loss   (30)   0.0%   (43)   0.0%   388    0.2%   (171)   -0.1%
                                         
Loss before income taxes   (23,075)   -33.2%   (13,988)   -15.2%   (38,862)   -17.2%   (31,576)   -10.9%
Income tax expense   80    0.1%   64    0.1%   223    0.1%   136    0.0%
                                         
Net loss  $(23,155)   -33.3%  $(14,052)   -15.3%  $(39,085)   -17.3%  $(31,712)   -10.9%
                                         
Basic and diluted loss per common share:                                        
                                         
Basic and diluted loss per share  $(12.73)       $(7.74)       $(21.51)       $(17.48)     
                                         
Weighted average number of common shares outstanding - basic and diluted   1,819         1,815         1,817         1,814      
                                         
SELECTED BALANCE SHEET CAPTIONS:
(in thousands, except store data)
                      November 2,
2019
        November 3,
2018
      
                                         
Cash, cash equivalents, and restricted cash                      $9,162        $14,563      
Merchandise inventory                       101,130         131,285      
Fixed assets (net)                       4,987         12,177      
Accounts payable                       29,994         42,272      
Borrowings under line of credit                       27,771         27,440      
Cash used in operations                       30,822         53,337      
Stores in operation, end of period                       206         227      

 

Notes:

 

1.Reverse Stock Split:

 

As previously reported, effective August 15th, 2019, the Company effected a 1-20 reverse stock split of its common stock. All share and earnings per share information have been retroactively adjusted to reflect this reverse stock split.

 

2.Reconciliation of net loss to adjusted EBITDA:

 

Adjusted EBITDA is defined as net loss, adjusted to exclude: (i) income tax expense; (ii) other (loss) income, which includes the write-down of an investment; (iii) interest expense; (iv) depreciation expense; (v) acquisition related amortization expense; (vi) acquisition related compensation expense, which includes retention bonuses and restricted stock; and (vii) asset impairment charges. Our method of calculating adjusted EBITDA may differ from other issuers and accordingly, this measure may not be comparable to measures used by other issuers. We use adjusted EBITDA to evaluate our own operating performance and as an integral part of our planning process. We present adjusted EBITDA as a supplemental measure because we believe such measure is useful to investors as a reasonable indicator of operating performance. We believe this measure is a financial metric used by many investors to compare companies. This measure is not a recognized measure of financial

6

performance under GAAP in the United States, and should not be considered as a substitute for operating earnings (losses), net earnings (loss) from continuing operations or cash flows from operating activities, as determined in accordance with GAAP.

 

   Thirteen Weeks Ended   Thirty-nine Weeks Ended 
(amounts in thousands)  November 2,
2019
   November 3,
2018
   November 2,
2019
   November 3,
2018
 
                     
Net loss  $(23,155)  $(14,052)  $(39,085)  $(31,712)
Income tax expense   80    64    223    136 
Other (income) loss   (30)   (43)   388    (171)
Interest expense   228    277    554    444 
Operating loss   (22,877)   (13,754)   (37,920)   (31,303)
Depreciation expense   811    1,331    2,272    3,893 
Asset impairment charges   16,035    -    16,035    - 
Acquisition related amortization expense   286    972    858    2,915 
Acquisition related compensation expense, net of contingency adjustment   -    750    66    2,991 
Adjusted EBITDA  $(5,745)  $(10,701)  $(18,689)  $(21,504)

 

The Company believes that fye adjusted loss from operations and etailz adjusted loss from operations, per the segment disclosure, when considered together with its GAAP financial results, provides management and investors with a more complete understanding of its business operating results, including underlying trends, by excluding the effects of certain charges. This measure is not a recognized measure of financial performance under GAAP in the United States, and should not be considered as a substitute for operating earnings (losses), net earnings (loss) from continuing operations or cash flows from operating activities, as determined in accordance with GAAP.

 

Trans World Entertainment is a leading multi-channel retailer, blending a 40-year history of entertainment retail experience with digital marketplace expertise. Our brands seamlessly connect customers with the most comprehensive selection of music, movies, and pop culture products on the channel of their choice. For over 40 years, the Company has operated as a leading specialty retailer of entertainment and pop culture merchandise with stores in the United States and Puerto Rico, primarily under the name fye, for your entertainment, and on the web at www.fye.com  and www.secondspin.com. In October 2016, the Company acquired etailz, Inc., a leading digital marketplace expert retailer, operating both domestically and internationally. etailz uses a data driven approach to digital marketplace retailing utilizing proprietary software and ecommerce insight coupled with a direct customer relationship engagement to identify new distributors and wholesalers, isolate emerging product trends, and optimize price positioning and inventory purchase decisions. Trans World Entertainment, which established itself as a public company in 1986, is traded on the Nasdaq National Market under the symbol “TWMC”.

 

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.

7

The following information was filed by Trans World Entertainment Corp (TWMC) on Wednesday, December 18, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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