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Sale of Fye Business (Unaudited)
 12 Months Ended
Feb. 01, 2020
Sale of Fye Business [Abstract]  
Sale of Fye Business
Note 13. Sale of fye Business (Unaudited)

The following unaudited pro forma condensed consolidated statements of operations for the years ended February 1, 2020  and February 2, 2019 present the Company’s results of operations as adjusted to give effect to the FYE Transaction as if it had occurred at the beginning of the period. The accompanying unaudited pro forma condensed consolidated balance sheet as of February 1, 2020 presents the Company’s financial position as if the FYE Transaction had occurred on February 1, 2020. The unaudited pro forma condensed consolidated balance sheet as of February 1, 2020 reflects the elimination of the certain assets and liabilities of the fye business, the elimination of all intercompany accounts, the inclusion of the net proceeds from the FYE Transaction, the application of such net proceeds to repay certain outstanding debt, and the recognition of the estimated loss from the FYE Transaction.

The unaudited pro forma information below is provided for information purposes only and is not necessarily indicative of what the actual financial position or results of operations of the Company would have been had the transaction actually occurred on the dates indicated, nor does it purport to indicate the future financial position or results of operations of the Company. The pro forma adjustments are based upon available information and assumptions believed to be reasonable in the circumstances. There can be no assurance that such information and assumptions will not change from those reflected in the unaudited pro forma condensed financial statements and notes thereto.

TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in thousands)

  
Historical
       
 
   
  
Trans World
Entertainment
Corp.
       
   
 
Pro forma
combined
 
  
As of February 1,
2020
  
Disposition of
fye Business
(Note i)
  
Pro forma
adjustments
 
 
 
As of
February 1,
2020
 
ASSETS
         
 
   
CURRENT ASSETS
         
 
   
Cash and cash equivalents
 
$
2,977
  
$
-
  
$
-
 
 
 
$
2,977
 
Restricted cash
  
950
   
-
   
-
 
 
  
950
 
Accounts receivable
  
4,201
   
(62
)
  
-
 
 
  
4,139
 
Merchandise inventory
  
67,958
   
(50,122
)
  
-
 
 
  
17,836
 
Prepaid expenses and other assets
  
3,979
   
(1,005
)
  
-
 
 
  
2,974
 
Total current assets
  
80,065
   
(51,189
)
  
-
 
 
  
28,876
 
             
 
    
Restricted cash
  
4,925
   
-
   
-
 
 
  
4,925
 
Fixed assets, net
  
2,190
       
-
 
 
  
2,190
 
Operating lease right-of-use assets
  
3,311
       
-
 
 
  
3,311
 
Goodwill
  
-
   
-
   
-
 
 
  
-
 
Intangible assets, net
  
1,760
   
-
   
-
 
 
  
1,760
 
Other assets
  
5,555
   
-
   
-
 
 
  
5,555
 
TOTAL ASSETS
 
$
97,806
   
(51,189
)
  
-
 
 
  
46,617
 
             
 
    
LIABILITIES
            
 
    
CURRENT LIABILITIES
            
 
    
Accounts payable
 
$
24,120
   
(9,674
)
  
-
 
 
 
$
14,446
 
Short-term borrowings
  
13,149
   
-
   
(11,778
)
(ii)
  
1,371
 
Accrued expenses and other current liabilities
  
4,479
   
(958
)
  
-
 
 
  
3,521
 
Deferred revenue
  
6,681
   
(6,681
)
  
-
 
 
  
-
 
Current portion of operating lease liabilities
  
9,510
   
(8,976
)
  
-
 
 
  
534
 
Total current liabilities
  
57,939
   
(26,289
)
  
(11,778
)
 
  
19,872
 
             
 
    
Operating lease liabilites
  
13,263
   
(11,059
)
  
-
 
 
  
2,204
 
Other long-term liabilites
  
22,089
   
(2,063
)
  
-
 
 
  
20,026
 
TOTAL LIABILITIES
  
93,291
   
(39,411
)
  
(11,778
)
 
  
42,102
 
             
 
    
SHAREHOLDERS’ EQUITY
            
 
    
Preferred stock  ($0.01 par value; 5,000,000  shares authorized; none issued)
  
-
   
-
   
-
 
 
  
-
 
Common stock ($0.01 par value; 200,000,000  shares  authorized; 3,225,627 shares issued)
  
32
   
-
   
-
 
 
  
32
 
Additional paid-in capital
  
345,102
   
-
   
-
 
 
  
345,102
 
Treasury stock at cost (1,409,316 shares)
  
(230,169
)
  
-
   
-
 
 
  
(230,169
)
Accumulated other comprehensive loss
  
(1,479
)
  
-
   
-
 
 
  
(1,479
)
(Accumulated deficit) Retained earnings
  
(108,971
)
  
(11,778
)
  
11,778
    
(108,971
)
TOTAL SHAREHOLDERS’ EQUITY (DEFICIT)
  
4,515
   
(11,778
)
  
11,778
 
 
  
4,515
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
 
$
97,806
  
$
(51,189
)
 
$
-
 
 
 
$
46,617
 

Notes:

(i)
Represents the elimination of certain assets of the fye business sold to the Purchaser and certain liabilities of the fye business assumed by the Purchaser, which is consistent with the terms of the Asset Purchase Agreement. Pursuant to the Asset Purchase Agreement, the Company will retain liabilities and obligations of the fye business not assumed by the Purchaser, including liabilities relating to pending lawsuits (including pending store manager class actions) and liabilities with respect to severance obligations for employees not transferred to the Purchaser. Below represents a reconciliation of previously disclosed fye segment assets and liabilities to the certain assets sold and liabilities assumed by the Purchaser.

fye segment assets as of February 1, 2020
 
$
69,395
  
Less assets not sold:
      
Cash and cash equivalents
  
(2,661
)
 
Restricted cash
  
(5,875
)
 
Accounts receivable
  
(1,866
)
 
Prepaid expenses and other current assets
  
(2,432
)
 
Other assets
  
(5,372
)
 
fye business assets sold
 
$
51,189
  
        
fye segment liabilities as of February 1, 2020
 
$
82,767
  
Less liabilities not assumed:
      
Accounts payable
  
(8,099
)
 
Short-term borrowings
  
(13,149
)
 
Accrued expenses and other current liabilities
  
(2,737
)
 
Other long-term liabilities
  
(20,024
)
 (a)
Operating lease liabilities
  
653
  
fye business liabilities assumed
 
$
39,411
  

 (a)
Other long-term liabilities consist of the Company’s Supplemental Executive Retirement Plan in the amount of $16.5 million and liabilities for uncertain tax positions in the amount of $3.5 million and certain other liabilities

(ii)
Represents the estimated net proceeds of the transaction used to pay down short-term borrowings, as required under the Company’s existing credit facility.

TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(Dollars and shares in thousands, except per share amounts)

  
Historical
       
 
   
  
Trans World
Entertainment
Corp.
       
   
 
Pro forma
combined
 
  
As of February 1,
2020
  
Disposition
of fye
Business
(Note i)
  
Pro forma
adjustments
 
 
 
As of
February 1,
2020
 
Net sales
 
$
321,993
  
$
(188,777
)
 
$
-
 
 
 
$
133,216
 
Other revenue
  
3,942
   
(3,942
)
  
-
 
 
  
-
 
Total revenue
  
325,935
   
(192,719
)
  
-
 
 
  
133,216
 
             
 
    
Cost of sales
  
229,836
   
(127,013
)
  
-
 
 
  
102,823
 
Gross profit
  
96,099
   
(65,706
)
    
 
  
30,393
 
             
 
  
-
 
Selling, general and administrative expenses
  
129,291
   
(93,258
)
  
8,591
 
(ii)
  
44,624
 
Asset impairment charges
  
23,983
   
(23,218
)
  
-
 
 
  
765
 
Loss from operations
  
(57,175
)
  
50,770
   
(8,591
)
 
  
(14,996
)
             
 
    
Interest expense
  
884
   
(884
)
  
(647
)
(iii)
  
(647
)
Other loss (income)
  
364
   
(364
)
  
-
 
 
  
-
 
             
 
    
Loss before income taxes
  
(58,423
)
  
52,018
   
(7,944
)
 
  
(14,349
)
Income tax expense
  
321
   
(277
)
  
-
 
 
  
44
 
Net loss
 
$
(58,744
)
 
$
52,295
  
$
(7,944
)
 
 
$
(14,393
)
             
 
    
BASIC AND DILUTED LOSS PER SHARE:
         
 
    
Basic and dilluted income per common share
 
$
(32.35
)
        
   
 
$
(7.93
)
             
 
    
Weighted average number of common shares outstanding - basic and diluted
  
1,816
         
 
  
1,816
 

Notes:
(i)
The elimination of the operating results of the fye business for the period presented, which is consistent with the terms of the Asset Purchase Agreement.
(ii)
Represents the corporate level expenses of the parent company, which primarily consist of executive compensation and professional fees.
(iii)
Represents an adjustment of interest expense assuming that $11.8 million of net cash proceeds were received at the beginning of the period and applied to repay debt.

TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(Dollars and shares in thousands, except per share amounts)

  
Historical
Trans World
Entertainment
Corporation
Year-ended
February 2,
2019
  
Disposition of
fye Business (i)
  
Pro Forma
Adjustments
   
Pro Forma
Trans World
Entertainment
Corporation
Year-ended
February 2,
2019
 
Net sales
 
$
412,997
  
$
(226,097
)
 
$
-
   
$
186,900
 
Other revenue
  
5,193
   
(5,193
)
  
-
    
-
 
Total revenue
  
418,190
   
(231,290
)
  
-
    
186,900
 
                  
Cost of sales
  
290,116
   
(142,031
)
  
-
    
148,085
 
Gross profit
  
128,074
   
(89,259
)
  
-
    
38,815
 
Selling, general and administrative expenses
  
165,222
   
(111,768
)
  
7,750
 
(ii)
  
61,204
 
Asset impairment charges
  
59,658
   
(1,946
)
  
-
    
57,712
 
Loss from operations
  
(96,806
)
  
24,455
   
(7,750
)
   
(80,101
)
Interest expense (income)
  
723
   
(723
)
  
(498
)
(iii)
  
(498
)
Other income
  
(227
)
  
227
   
-
    
-
 
Loss before income taxes
  
(97,302
)
  
24,951
   
(7,252
)

  
(79,603
)
Income tax expense
  
80
   
(53
)
  
-
    
27
 
Net loss
 
$
(97,382
)
 
$
25,004
  
$
(7,252
)

 
$
(79,630
)
                  
Basic and diluted loss per share:
                 
Basic and diluted loss per common share
 
$
(53.67
)
          
$
(43.90
)
                  
Weighted average number of common shares outstanding – basic and diluted
  
1,814
            
1,814
 

Notes:
(i)
The elimination of the operating results of the fye business for the period presented, which is consistent with the terms of the Asset Purchase Agreement.
(ii)
Represents the corporate level expenses of the parent company. Does not reflect (i) income or expenses arising out of the Transition Services Agreement or (ii) certain severance payments that will be payable by the Company in respect of employees not transferred to the Purchaser.
(iii)
Represents an adjustment of interest expense assuming that $11.8 million of net cash proceeds were received at the beginning of the period and applied to repay debt.