-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UfjEkwc99OnBJ+Zpa5wrBBg9uNctrkMpHbsFA8/3b516dzxJTgBXmOZKwVpOow34 7iyHzXHX2wWDJqNcP4tSNg== 0000795212-00-000019.txt : 20001214 0000795212-00-000019.hdr.sgml : 20001214 ACCESSION NUMBER: 0000795212-00-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001028 FILED AS OF DATE: 20001212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANS WORLD ENTERTAINMENT CORP CENTRAL INDEX KEY: 0000795212 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL- COMPUTER & PRERECORDED TAPE STORES [5735] IRS NUMBER: 141541629 STATE OF INCORPORATION: NY FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14818 FILM NUMBER: 787884 BUSINESS ADDRESS: STREET 1: 38 CORPORATE CIRCLE CITY: ALBANY STATE: NY ZIP: 12203 BUSINESS PHONE: 5184521242 MAIL ADDRESS: STREET 1: 38 CORPORATE CIRCLE CITY: ALBANY STATE: NY ZIP: 12203 FORMER COMPANY: FORMER CONFORMED NAME: TRANS WORLD MUSIC CORP DATE OF NAME CHANGE: 19920703 10-Q 1 0001.txt Third Quarter Filing on Form 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED OCTOBER 28, 2000 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT FOR THE TRANSITION PERIOD FROM ............ TO ............ COMMISSION FILE NUMBER: 0-14818 TRANS WORLD ENTERTAINMENT CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) New York 14-1541629 --------------------------------- ---------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 38 Corporate Circle Albany, New York 12203 ------------------------------------------------------------ (Address of principal executive offices, including zip code) (518) 452-1242 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by a check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 par value, 45,442,064 shares outstanding as of November 25, 2000 TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Form 10-Q Page No PART 1. FINANCIAL INFORMATION Item 1 - Financial Statements Condensed Consolidated Balance Sheets at October 28, 2000 (unaudited), January 29, 2000 and October 30, 1999 (unaudited) 3 Condensed Consolidated Statements of Income - Thirteen Weeks and Thirty-nine Weeks Ended October 28, 2000 (unaudited) and October 30, 1999 (unaudited) 4 Condensed Consolidated Statements of Cash Flows - Thirty-nine Weeks Ended October 28, 2000 (unaudited) and October 30, 1999 (unaudited) 5 Notes to Condensed Consolidated Financial Statements (unaudited) 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K 13 Signatures 13 TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION Item 1 - Financial Statements CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) October 28, January 29, October 30, 2000 2000 1999 ------------------------------------------- (unaudited) (unaudited) ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents $ 72,703 $280,026 $ 86,682 Merchandise inventory 471,830 437,363 495,744 Current deferred tax asset --- --- 4,502 Other current assets 13,604 11,176 18,482 -------- -------- -------- Total current assets 558,137 728,565 605,410 -------- -------- -------- DEFERRED TAX ASSET 34,899 34,431 32,278 NET FIXED ASSETS 139,099 144,694 141,796 OTHER ASSETS 50,501 48,720 44,597 -------- ------- ------- TOTAL ASSETS $782,636 $956,410 $824,081 ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Accounts payable $259,892 $353,294 $313,516 Income taxes payable 839 21,908 --- Accrued expenses and other liabilities 21,662 32,021 26,024 Current deferred taxes 9,568 12,469 --- Current portion of long-term debt and capital lease obligations 5,600 5,311 5,072 -------- -------- -------- Total current liabilities 297,561 425,003 344,612 --------- -------- -------- LONG-TERM DEBT, less current portion --- --- --- CAPITAL LEASE OBLIGATIONS, less current portion 15,231 19,461 19,666 OTHER LIABILITIES 29,290 17,773 18,541 -------- -------- -------- TOTAL LIABILITIES 342,082 462,237 382,819 -------- -------- -------- SHAREHOLDERS' EQUITY: Preferred stock ($.01 par value; 5,000,000 shares authorized; none issued) --- --- --- Common stock ($.01 par value; 200,000,000 shares authorized; 53,678,821, 53,425,867 and 53,065,264 shares issued, respectively) 537 534 531 Additional paid-in capital 284,868 283,932 280,152 Treasury stock, at cost (6,928,432, 1,177,432 and 104,432 shares, respectively) (65,952) (11,855) (386) Unearned compensation - restricted stock (275) (348) (376) Accumulated comprehensive loss (587) --- --- Retained earnings 221,963 221,910 161,341 -------- -------- -------- TOTAL SHAREHOLDERS' EQUITY 440,554 494,173 441,262 -------- -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $782,636 $956,410 $824,081 ======== ======== ========
See Notes to Condensed Consolidated Financial Statements. Page 3 TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (unaudited) Thirteen Weeks Ended Thirty-nine Weeks Ended ------------------------- --------------------------- October 28, October 30, October 28, October 30, 2000 1999 2000 1999 ------------------------- --------------------------- Sales $265,597 $275,968 $861,223 $840,262 Cost of sales 173,896 178,987 554,681 535,767 --------- --------- -------- -------- Gross profit 91,701 96,981 306,542 304,495 Selling, general and administrative expenses 99,298 90,576 291,052 276,569 Costs related to the Camelot merger --- --- --- 25,721 --------- --------- -------- -------- Income (loss) from operations (7,597) 6,405 15,490 2,205 Interest expense (income) (514) (108) (2,466) 784 --------- --------- -------- -------- Income (loss) before income taxes (7,083) 6,513 17,956 1,421 Income tax expense (benefit) 8,513 2,736 17,902 597 --------- --------- -------- -------- NET INCOME (LOSS) $(15,596) $ 3,777 $ 54 $ 824 ========= ========= ======== ======== BASIC EARNINGS (LOSS) PER SHARE $ (0.32) $ 0.07 $ 0.00 $ 0.02 ========= ========= ======== ======== Weighted average number of common shares outstanding - basic 48,364 52,775 48,819 52,313 ========= ========= ======== ======== DILUTED EARNINGS (LOSS) PER SHARE $ (0.32) $ 0.07 $ 0.00 $ 0.02 ========= ========= ========== ======== Weighted average number of common shares outstanding - diluted 48,364 53,974 49,696 53,177 ========== ========= ========= ======== See Notes to Condensed Consolidated Financial Statements.
Page 4 TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Thirty-nine Weeks Ended ------------------------- October 28, October 30, 2000 1999 ------------------------- NET CASH USED BY OPERATING ACTIVITIES $(120,233) $( 7,680) ------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment (22,864) (37,067) Acquisition of business, net of cash acquired (4,862) --- Purchase of other investments (2,414) --- Disposal of videocassette rental inventory, net 75 136 ------------------------ Net cash used by investing activities (30,065) (36,931) ------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury shares (54,097) --- Proceeds from capital leases --- 8,436 Exercise of stock options 1,013 8,011 Payments of long term debt & lease obligations (3,941) (24,565) ------------------------ Net cash used by financing activities (57,025) (8,118) ------------------------ Decrease in cash and cash equivalents (207,323) (52,729) Cash and cash equivalents, beginning balance 280,026 139,411 ------------------------ Cash and cash equivalents, ending balance $ 72,703 $ 86,682 ======================== Supplemental disclosure of non-cash investing and financing activities: Income tax benefit resulting from exercise of stock options $ 646 $ 1,081 Issuance of treasury stock under incentive stock programs 7 13 See Notes to Condensed Consolidated Financial Statements.
Page 5 TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS October 28, 2000 and October 30, 1999 (unaudited) Note 1. Basis of Presentation The accompanying unaudited financial statements consist of Trans World Entertainment Corporation and its subsidiaries, (the "Company"), all of which are wholly owned, except Second Spin, which is majority owned . All significant inter-company accounts and transactions have been eliminated. The interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished in these condensed consolidated financial statements reflect all normal, recurring adjustments, which, in the opinion of management, are necessary for the fair presentation of such financial statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to rules and regulations applicable to interim financial statements. Certain amounts in prior years' financial statements have been reclassified to conform with the current year presentation. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2000. Note 2. Seasonality The Company's business is seasonal in nature, with the highest sales and earnings occurring in the fourth fiscal quarter. Note 3. Depreciation and Amortization Depreciation and amortization of videocassette rental inventory included in cost of sales totaled $190,000 and $180,000 for the thirteen weeks ended October 28, 2000 and October 30, 1999, respectively. Depreciation and amortization of videocassette rental inventory included in cost of sales totaled $605,000 and $680,000 for the thirty-nine weeks ended October 28, 2000 and October 30, 1999, respectively. Depreciation and amortization of fixed assets for the Company's distribution centers included in cost of sales totaled $413,000 and $410,000 for the thirteen weeks ended October 28, 2000 and October 30, 1999, respectively. For the thirty-nine week periods ended October 28, 2000 and October 30, 1999, depreciation and amortization of fixed assets for the Company's distribution centers included in cost of sales totaled $1.2 million. Depreciation and amortization for the remaining fixed assets included in Selling, General & Administrative ("SG&A") expenses totaled $9.1 million and $9.4 million in the thirteen weeks ended October 28, 2000 and October 30, 1999, respectively. The depreciation and amortization included in SG&A was $26.3 and $26.7 million for the thirty-nine week periods ended October 28, 2000 and October 30, 1999, respectively. Page 6 TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS October 28, 2000 and October 30, 1999 (unaudited) (continued) Note 4. Earnings Per Share Weighted average shares are calculated as follows: Thirteen Weeks ended Thirty-nine Weeks ended ------------------------- ------------------------- October 28, October 30, October 28, October 30, 2000 1999 2000 1999 ----------- ----------- ---------- ---------- Weighted average common shares outstanding - basic 48,364 52,775 48,819 52,313 Dilutive effect of employee stock options --- 1,199 877 864 ----------- ----------- ---------- ---------- Weighted average common shares outstanding-diluted 48,364 53,974 49,696 53,177 =========== =========== ========== ========== Anti dilutive stock options 5,675 1,442 3,108 1,115 =========== =========== ========== ==========
For the thirteen week period ended October 28, 2000, the impact of outstanding options were not considered because the Company had a net loss. For all other periods presented, antidilutive stock options outstanding had an exercise price greater than the average market price during the period. Note 5. Comprehensive Income (Loss) The Company's total comprehensive income (loss) was as follows: Thirteen Weeks ended Thirty-nine Weeks ended ------------------------- ------------------------- October 28, October 30, October 28, October 30, 2000 1999 2000 1999 ----------- ----------- ---------- ----------- Net income (loss) ($15,596) $3,777 $54 $824 Other comprehensive loss: Unrealized loss on available-for-sale securities (587) --- (587) --- ----------- ----------- ---------- ---------- Total comprehensive income (loss) ($16,183) $3,777 ($533) $824 =========== =========== ========== ==========
Note 6. Recently Issued Accounting Standards Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," which established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. Statement No. 133 has subsequently been amended by Financial Accounting Standards Board Statement No. 137 which delays the effective date for implementation of Statement No. 133 until fiscal quarters of fiscal years beginning after June 15, 2000. Management is currently evaluating the impact of SFAS No. 133 on the Company's consolidated financial statements and is in the process of reviewing all contractual arrangements of the Company. Page 7 TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS October 28, 2000 and October 30, 1999 (unaudited) (continued) Note 7. Legal Proceedings On October 16, 2000, the United States District Court for the District of Delaware issued an opinion in favor of the Internal Revenue Service ("IRS"), in the case of the IRS vs. Camelot Music Holdings Inc.("Camelot"), a wholly-owned subsidiary of the Company. The case was brought against Camelot by the IRS to challenge the deduction of interest expenses for certain tax years that ended on or before February 1994, related to corporate owned life insurance policies held by CM Holdings. The court ruled that the interest deductions should not be allowed and the Company is responsible for interest and penalties. As a result of the ruling, the Company reserved $11 million during the quarter ended October 28, 2000. The Company has filed a notice of appeals in the United States Third Circuit Court of Appeals in response to the decision. On August 8, 2000, twenty eight states filed an antitrust action in the United States District Court for the Southern District of New York, against the five major music distributors (EMI Music Distribution, Bertelsmann Music Group, Inc., Warner-Elektra-Atlantic Corporation, Sony Music Entertainment, Inc., Universal Music and Video Distribution Corp.), the Company, Musicland Stores Corporation and MTS Inc. (Tower Records). The states are seeking unspecified damages for alleged illegal price-fixing agreements related to the five major music distributors' minimum advertised pricing ("MAP") policies. The states allege that the policy increased compact disc prices in violation of state and federal antitrust law, kept compact disc prices artificially high and penalized retailers that did not participate. It is management's belief that the lawsuit is without merit and the Company will ultimately prevail in this regard. The Company is subject to other legal proceedings and claims that have arisen in the ordinary course of business and have not been finally adjudicated. Although there can be no assurance as to the ultimate disposition of these matters, it is management's opinion, based upon the information available at this time, that the expected outcome of these matters, individually or in the aggregate, will not have a material adverse effect on the results of operations and financial condition of the Company. Note 8. Subsequent Events On October 30, 2000, the Company acquired the assets of 112 stores owned by Wax Works, Inc., a privately-held music and video retailer. The stores operate under the name "Disc Jockey" and are located primarily in mall locations throughout the Midwest and Southern United States. The acquisition will be accounted for using the purchase method. The Company paid $52.0 million for the assets, including merchandise inventory, fixed assets, leasehold interests and other related current assets. The Company will recognize approximately $10.2 million in goodwill related to the acquisition which will be amortized on a straight-line basis over a 15 year period. NOTE 9. Other Investments Included in SG&A is a $2.1 million write-off of an investment in an internet business. Page 8 TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations The following is an analysis of the Company's results of operations, liquidity and capital resources. To the extent that such analysis contains statements which are not of a historical nature, such statements are forward-looking statements, which involve risks and uncertainties. These risks include, but are not limited to, changes in the competitive environment for the Company's products, including the entry or exit of non-traditional retailers of the Company's products to or from its markets; the release by the music industry of an increased or decreased number of "hit releases;" general economic factors in markets where the Company's products are sold; and other factors discussed in the Company's filings with the Securities and Exchange Commission. RESULTS OF OPERATIONS Thirteen Weeks Ended October 28, 2000 Compared to the Thirteen Weeks Ended October 30, 1999 Sales. The Company's total sales decreased 4% to $265.6 million for the thirteen weeks ended October 28, 2000 compared to $276.0 million for the thirteen weeks ended October 30, 1999. The decrease was attributable to a comparable store sales decrease of 4%. For the thirteen weeks ended October 28, 2000, comparable store sales decreased 4% for both mall and free standing stores. By merchandise category, comparable store sales were down 9% in music, and increased 24% in video and 7% in accessories. Music sales were negatively impacted by a weak new release schedule for the quarter, as well as the continued decline in sales of full length cassettes and cassette singles. The increase in video sales was driven by the growth in the DVD format. Gross Profit. Gross profit, as a percentage of sales, decreased to 34.5% in the thirteen weeks ended October 28, 2000 from 35.1% in the thirteen weeks ended October 30, 1999. The decrease in margin relates to the loss of sales in the high margin singles category and increased promotional pricing early in the quarter in response to soft sales. Selling, General and Administrative Expenses. Selling, general and administrative expenses ("SG&A"), as a percentage of sales, increased to 37.4% in the thirteen weeks ended October 28, 2000 from 32.8% in the thirteen weeks ended October 30, 1999. Included in SG&A is a $2.1 million write-off of an investment in an internet business. Excluding the one-time charge, SG&A expenses were 36.6% of sales. The increase primarily relates to increased spending on initiatives including branding, supply chain and e-commerce. Page 9 TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Interest Expense (Income). Net interest income was $514,000 in the thirteen weeks ended October 28, 2000 compared to $108,000 for the thirteen weeks ended October 30, 1999. The improvement in net interest relates to increased investment income from higher average cash balances and higher interest rates. Income Tax Expense. The Company's income tax expense was $8.5 million for the thirteen weeks ended October 28, 2000. Included in income tax expense was an $11.0 million charge, which resulted from a court decision disallowing the deduction of interest expenses related to corporate owned life insurance policies (see Note 7. Legal Proceedings). Excluding the charge, the Company's effective tax rate was 35.1% for the thirteen weeks ended October 28, 2000, decreasing from 42.0% for the thirteen weeks ended October 30, 1999. During 1999, certain non-deductible expenses related to the Camelot merger impacted the Company's effective tax rate. Net Income. The Company's net loss was $15.6 million for the thirteen weeks ended October 28, 2000, compared to net income of $3.8 million for the same period last year. Excluding one-time charges, the Company's net loss was $3.1 million. The decrease in net income is attributable to decreased sales, lower gross margins and increased SG&A expenses. Thirty-nine Weeks Ended October 28, 2000 Compared to the Thirty-nine Weeks Ended October 30, 1999 Sales. The Company's total sales increased 2% to $861.2 million for the thirty-nine weeks ended October 28, 2000 compared to $840.3 million for the thirty-nine weeks ended October 30, 1999. Comparable store sales increased 2% for the period. For the thirty-nine weeks ended October 28, 2000, comparable store sales increased 2% for mall stores and 3% for free standing stores. By merchandise category, comparable store sales decreased 2% in music and increased 25% in video and 8% in accessories. Gross Profit. Gross profit, as a percentage of sales, decreased to 35.6% in the thirty-nine weeks ended October 28, 2000 from 36.2% in the thirty-nine weeks ended October 30, 1999. The decrease in margin relates to the loss of sales in the high margin singles category and increased promotional pricing in the third quarter. Selling, General and Administrative Expenses. Selling, general and administrative expenses ("SG&A"), as a percentage of sales, increased to 33.8% in the thirty-nine weeks ended October 28, 2000 from 32.9% in the thirty-nine weeks ended October 30, 1999. The increase primarily relates to increased spending on initiatives including branding, supply chain and e-commerce. Page 10 TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Interest Expense (Income). Net interest income was $2.5 million in the thirty-nine weeks ended October 28, 2000 compared to an expense of $0.8 million for the thirty-nine weeks ended October 30, 1999. The improvement in net interest is due to increased investment income from higher average cash balances and higher interest rates. Costs Related to the Camelot Merger. A one-time pre-tax charge of $25.7 million for costs related to the merger with Camelot was taken in the thirty-nine weeks ended October 30, 1999. The charge includes a write-off of redundant assets between the two companies of $8.0 million, investment banking fees and other professional costs of $10.0 million, printing and mailing costs for the joint proxy/prospectus filed on March 29, 1999 of $2.0 million, system and integration costs of $2.0 million and severance costs of $4.0 million. Income Tax Expense (Benefit). The Company's income tax expense was $17.9 million for the thirty-nine weeks ended October 28, 2000. Included in income tax expense was an $11.0 million charge, which resulted from a court decision disallowing the deduction of interest expenses, related to corporate owned life insurance policies (see Note 7. Legal Proceedings). Excluding the charge, the Company's effective tax rate was 38.4% for the thirty-nine weeks ended October 28, 2000, decreasing from 42.0% for the thirty-nine weeks ended October 30, 1999. During 1999, certain non-deductible expenses related to the Camelot merger impacted the Company's effective tax rate. Net Income. The Company's net income decreased to $54,000 for the thirty-nine weeks ended October 28, 2000, compared to $824,000 for the same period last year. Excluding the one-time charges, net income was $12.4 million for the thirty-nine weeks ended October 28, 2000, compared to $15.7 excluding the one-time Camelot merger-related costs. The decrease in net income is attributable to lower gross margins and higher SG&A expenses. LIQUIDITY AND CAPITAL RESOURCES Liquidity. The Company's primary sources of working capital are cash flows from operations and borrowings under its revolving credit facility. The Company had cash balances of approximately $72.7 million at October 28, 2000, compared to $280.0 million at the end of fiscal 1999. Cash used by operating activities was $120.2 million for the thirty-nine weeks ended October 28, 2000. The primary uses of cash were a $93.4 million reduction of accounts payable, a $34.5 million increase in inventory and a $21.1 million net reduction in income taxes payable. Cash used in financing activities was $57.0 million for the thirty-nine weeks ended October 28, 2000. The primary use of cash was $54.1 million for the purchase of 5.8 million shares of common stock under repurchase programs authorized by the Board of Directors. As of October Page 11 TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION Item 2 - Management's Discussion and Analysis of Financial Condition and Liquidity and Capital Resources (continued) 28, 2000, the Company had completed the purchase of 5.8 million shares of the 10.0 million shares authorized by the Board. The Company has a three-year $100 million secured revolving credit facility with Congress Financial Corporation that expires in July 2003 and automatically renews on a year-to-year basis thereafter with the consent of both parties. The Revolving Credit Facility contains certain restrictive provisions, including provisions governing cash dividends and acquisitions, is collateralized by merchandise inventory and contains a minimum net worth covenant. On October 28, 2000, the Company had no outstanding borrowings under the Revolving Credit Facility, and $100 million was available for borrowing. On August 11, 2000, the Company acquired a majority interest in SecondSpin.com for $5.0 million. In addition, SecondSpin.com can borrow up to $10.0 million in the form of convertible debt. As of October 28, 2000, SecondSpin.com had borrowed $2.5 million and had an additional $7.5 million available to borrow. Capital Resources. On April 22, 1999, the Company acquired by merger Camelot, a Delaware corporation, by issuing 1.9 shares of the Company's common stock in exchange for each share of Camelot's outstanding common stock. Upon consummation of the merger, Camelot became a wholly owned subsidiary of the Company. The merger was accounted for as a tax-free pooling-of-interests. All financial and per share information for prior periods has been restated to reflect the results of the combined company. During the first thirty-nine weeks of 2000, the Company had capital expenditures of $22.9 million. The Company plans to spend $35.0 million, net of construction allowances, for capital expenditures in fiscal 2000. During the first thirty-nine weeks of 2000, the Company opened or relocated 32 stores and closed 64 stores. Page 12 TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K (A) Exhibits - Exhibit No Description Page No. ----------- ----------------------- --------- 27 Financial Data Schedule N/A (electronic filing only) (B) Reports on Form 8-K - On October 19, 2000, the Company filed a report on Form 8-K announcing the United States District Court for the District of Delaware issued an opinion in favor of the IRS, in the case of IRS vs. Camelot Music Holdings, Inc., a wholly-owned subsidiary of the Company. On November 13, 2000, the Company filed a report on Form 8-K announcing the closing on the acquisition of the Disc Jockey music chain from Wax Works, Inc. Omitted from this Part II are items which are not applicable or to which the answer is negative to the periods covered. SIGNATURES Pursuant to the requirements of the Securities and 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 December 12, 2000 By: /s/ ROBERT J. HIGGINS ---------------------- Robert J. Higgins Chairman and Chief Executive Officer (Principal Executive Officer) December 12, 2000 By: /s/ JOHN J. SULLIVAN ---------------------- John J. Sullivan Senior Vice President and Chief Financial Officer (Principal Financial Officer) EX-27 2 0002.txt ARTICLE 5 FDS FOR QUARTERLY REPORT OF FORM 10-Q
5 THIS SCHEDULE CONTAINS DATA EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS, AND THE CONSOLIDATED STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000795212 TRANS WORLD ENTERTAINMENT
AMOUNT ITEM DESCRIPTION (IN THOUSANDS, EXCEPT PER SHARE DATA) - ---------------- ------------------------------------- FEB-03-2001 JAN-30-2000 OCT-28-2000 9-MOS 72,703 0 0 0 471,830 558,137 303,579 164,480 782,636 297,561 0 0 0 537 440,017 782,636 861,223 861,223 554,681 554,681 291,052 0 (2,466) 17,956 17,902 54 0 0 0 54 .00 .00
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