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InterNet Bankruptcy Library - News for April 24, 1997

Bankruptcy News For April 24, 1997

  1. The Krystal Company Reports 1st
            Quarter Increases in Sales, Improved Operating Income and
            Emergence From Chapter 11

  3. Musicland First Quarter EBITDA Loss
            Cut By Two-Thirds

The Krystal Company Reports 1st Quarter
Increases in Sales, Improved Operating Income and Emergence From
Chapter 11

CHATTANOOGA, Tenn., April 24, 1997 - href="chap11.krystal.html">The Krystal Company (Nasdaq:
KRYSQ), an operator and franchisor of quick-service hamburger
restaurants, today reported net income for the first quarter
ended March 30, 1997 of $403,000, or five cents per share, versus
a comparable net loss of $146,000, or two cents per share, for
the first quarter of 1996, before deducting professional fees and
other expenses in both periods related to the Company's Chapter
11 proceedings and an extraordinary item charge in 1997 related
to early extinguishment of debt. The effects of these two unusual
items reduced net income in the first quarter of 1997 by nine
cents per share and increased the net loss in the first quarter
of 1996 by eight cents per share. After the special charges were
made, a net loss of $263,000, or four cents per share, was
reported for the first quarter of 1997 versus a net loss of
$746,000, or 10 cents per share, for the first quarter of 1996.

Total revenues for the quarter were $59.2 million, up
approximately 2.6% from the previous year's comparable period.
Restaurant sales were up 2.5% to $57.3 million. Company-owned
same restaurant sales for the quarter were up 4.4% versus the
same period in 1996. According to Carl D. Long, Chief Executive
Officer of The Krystal Company, the sales increase can be
attributed to several factors, including price increases, new
advertising and promotional programs, continuing improvements in
operations at the restaurant level and the mild winter weather in
the southeast in 1997 compared to 1996.

The Company had 249 restaurants open at the end of the first
quarter of 1997 compared to 254 at the end of the first quarter
of 1996. The Company opened no new restaurants in the first
quarter of 1997 or 1996. Franchisees and licensees opened two new
restaurants in the first quarter of 1997 compared to one in the
first quarter of 1996.

First quarter revenues included franchise and license fees and
royalties of $748,000 compared with $651,000 in the first quarter
of 1996, an increase of 14.9%. Krystal had 90 franchised or
licensed restaurants in operation at the end of the first quarter
of 1997 compared to 80 at the end of the first quarter of 1996.
Sales by franchisees and licensees were $15.5 million for the
first quarter, up 13.4% over the same period in 1996.

Separately, the Company announced that its Plan of
Reorganization was confirmed on April 10, 1997 allowing the
Company to emerge from Chapter 11 on April 23, 1997. Krystal
sought Chapter 11 protection in order to resolve fully and
completely all Fair Labor Standards Act (FLSA) wage claims filed
against the Company and has previously announced settlement of
those claims. Mr. Long said

"All other valid claims against the Company will be paid in
full under the terms of the Plan of Reorganization."

Founded in 1932, The Krystal Company is one of the oldest
fast-food chains in the United States. Krystal owns and operates
249 restaurants in Alabama, Arkansas, Florida, Georgia, Kentucky,
Mississippi, South Carolina and Tennessee. Krystal franchisees
and licensees operate 90 restaurants located in Alabama,
Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi,
North Carolina, South Carolina and Tennessee.

        First quarter:                                 1997            1996
        Revenues                                   $59,163,000     $57,667,000
        Net income (loss) before the effect of
         reorganization item (a) and
         extraordinary item (b)                    $    403,000
        Net income (loss)                          $   (263,000)   $
        Average shares                                7,484,000      7,522,000
        Net income (loss) per share before the
         effect of reorganization item (a) and
         extraordinary item (b)                    $        .05    $
        Net income (loss) per share                $       (.04)   $

        (a)  Reorganization item represents administrative costs incurred in
             connection with Chapter 11 proceeding.

        (b)  Extraordinary item represents a write off of unamortized
             costs in conjunction with extinguishment of debt.

                   (In thousands, except per share data)

                                                 For the Three Months Ended
                                                   March 30,      March 31,
                                                     1997           1996

        Restaurant sales                           $  57,264     $  55,876
        Franchise fees                                    41            33
        Royalties                                        707           618
        Other revenue                                  1,151         1,140
        Total                                         59,163        57,667

           Costs and expenses:
        Cost of restaurant
         sales                                        47,483        46,769
        Deprec. and amort.
         expense                                       2,622         2,802
        Gen. and admin.
         expenses                                      6,717         6,440
        Other expenses, net                              831           963
        Total                                         57,653        56,974

        Operating income                               1,510           693
           Reorganization item:
        Professional fees
         and other exps.                                (719)         (967)

           Interest expense:
        Contractual rate
         interest                                       (986)       (1,009)
        Interest related to certain pre-
         petition liabilities, net                      (182)         (168)
        Interest income                                  307           250
        Loss before benefit from income taxes and
         extraordinary item                              (70)       (1,201)
        Benefit from income taxes                        (27)         (455)
        Loss before extraordinary item                   (43)         (746)
           Extraordinary item:
        Loss on early extinguishment of debt,
         net of applicable income tax benefit
         of $134,000 in 1997                             220           ---
        Net loss                                   $    (263)    $    (746)
        Loss per common share                      $   (0.04)    $   (0.10)
        Wtd. avg. number of common
         shares outstanding                            7,484         7,522

        NOTE:  This is not a complete set of financial statements.

                            Consolidated Balance Sheets
                                  (In thousands)

                                                     March 30,   Dec. 29
                                                       1997        1996
                                                    (unaudted)  (audited)
           Current Assets:
        Cash and temporary investments               $ 32,952   $ 28,765
        Receivables, net                                1,712      2,566
        Income tax receivables                            306        ---
        Net investment in direct financing leases -
         current portion                                  451        562
        Inventories                                     1,822      2,156
        Deferred tax asset                              8,327      8,327
        Prepayments and other                             577      1,980
        Total current assets                           46,147     44,356
        Net investment in direct financing leases,
         excluding current portion                        227        305
        Property, buildings and equipment, net         90,204     91,173
        Leased properties, net                          1,601      1,653
           Other assets:
        Cash surrender value of life insurance          5,746      5,638
        Other                                             786        745
        Total other assets                              6,532      6,383
        Total assets                                 $144,711   $143,870

           Current Liabilities:
        Accounts payable                             $  3,756   $  4,535
        Accrued liabilities                            20,844     17,986
        Current portion of liabilities subject
         to compromise                                 23,817        ---
        Current portion of long-term debt                  58        967
        Current portion of capital lease obligations      376        454
        Income taxes payable                              ---        822
        Total current liabilities                      48,851     24,764
        Liabilities subject to compromise              34,500     58,317
        Long-term debt, excluding current portion       3,654      3,090
        Capital lease obligations, excluding current
         portion                                        2,203      2,278
        Deferred income taxes                           2,287      2,286
        Other long-term liabilities                     8,743      8,447
           Shareholders' equity:
        Preferred stock, without par value; 5,000,000
         shares authorized; no shares issued and
         outstanding                                      ---        ---
        Common stock, without par value; 15,000,000
         shares authorized; shares issued and
         outstanding, 7,478,568 at March 30, 1997
         and 7,491,768 at December 29, 1996            40,398     40,556
        Retained earnings                               5,610      5,873
        Deferred compensation                          (1,535)    (1,741)
        Total shareholders' equity                     44,473     44,688
        Total liabilities and shareholders' equity   $144,711   $143,870

        NOTE:  This is not a complete set of financial statements.

SOURCE Krystal Company /CONTACT: Cam Scearce, The Krystal
Company, 423-757-1510/

Musicland First Quarter EBITDA Loss
Cut By Two-Thirds

MINNEAPOLIS, Minn., April 24, 1997 - Musicland Stores
Corporation (NYSE: MLG) today announced that earnings before
interest, taxes, depreciation, and amortization (EBITDA), a
measure of operating cash flow, improved by nearly two-thirds in
the first quarter ended March 31, 1997, to a loss of $3.5 million
compared with a loss of $9.7 million in the first quarter last
year. The net loss for the first quarter was $21.0 million, or
$0.63 per share, compared to a loss of $52.6 million, or $1.58
per share, in the same period a year ago. Last year's first
quarter included a $35.0 million pretax restructuring charge
related to the company's underperforming store closing program.

First quarter earnings benefited from the company's
store-closing program and careful cost management. In particular,
the first quarter EBITDA as a percent of sales improved to (.9%)
from (2.5%) because of the closing of unproductive stores, lower
store expense and rent reductions. Additionally, the company
benefited from a more efficient use of advertising dollars.

Jack W. Eugster, chairman and chief executive officer, said,
"We are pleased that the steps we have taken to improve our
business, our store-closing and capital management programs and
strategic realignment, have reduced the first quarter pretax
loss. Despite progress, it is important to note that improved
borrowing flexibility and capacity from our bank group and
uninterrupted shipments from our trade vendors are essential to
the company's continued financial viability. We are currently
negotiating with our banks regarding additional financing and
modification or waivers of loan covenants, which are critical to
the execution of our plans this fall. At this time, the outcome
of our bank group negotiations is uncertain."

Revenues for the quarter decreased 2.0 percent to $376.1
million from $383.6 million for the same period a year ago. First
quarter sales results reflected the closing of 126 stores since
the first quarter of 1996 (including 29 Media Play stores) offset
by a comparable store sales increase of 2.9%. The company faces a
more difficult sales comparison in the second quarter because of
the 1996 releases of audio product such as Hootie and the
Blowfish and Metallica and video titles including "Waiting
to Exhale" and "Aristocats."

Sales for the company's superstore division (Media Play and On
Cue) declined by 2.7% to $130.2 million as a result of the store
count decrease to 224 from 248 at the end of March 1996. However,
the superstore division experienced an increase in
comparable-store sales of 5.6%. Sales in the mall division (Sam
Goody/Musicland and Suncoast Motion Picture Company) declined
1.3% to $243.1 million as a result of a decline in the number of
mall stores to 1,147 from 1,224 at the end of last year's first
quarter. Comparable-store sales for the mall division increased
1.8%, offsetting the decline from store closings.

Square footage for Musicland Stores Corporation totaled 8.4
million at March 31, 1997, a 14.6 percent decrease from 9.9
million in the same period a year earlier. The company freed
additional working capital by closing 43 Sam Goody/Musicland
stores, 19 Media Play stores, nine Suncoast stores, two On Cue
stores and one U.K. store, for a total of 74 closings in the
first quarter. At the end of the quarter, the company operated a
total of 1,392 stores (68 Media Play stores, 156 On Cue stores,
413 Suncoast stores, 734 Sam Goody/Musicland stores and 21 United
Kingdom stores) in 49 states, the United Kingdom, Puerto Rico and
the Virgin Islands.

Forward-looking statements in this news release, if any, are
made under the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Certain important factors could
cause results to differ materially from those anticipated by the
forward-looking statements, including the impact of changing
economic or business conditions, the impact of competition, the
availability of favorable credit and trade terms, the success of
new music and video releases, other risk factors inherent in the
entertainment industry and other factors discussed from time to
time in reports filed by the company with the Securities and
Exchange Commission.


                       (In thousands, except per share amounts)

                                                       Three Months Ended
                                                           March 31,
                                                     1997             1996

        Sales                                        $376,080         $383,570

        Cost of sales                                 249,617          253,737
        Selling, general and administrative expenses  129,946          139,489

          Operating loss before depreciation,
               amortization and restructuring charge   (3,483)         (9,656)

        Depreciation and amortization                   9,852          11,559
        Restructuring charge                                -          35,000
           Operating loss                             (13,335)        (56,215)
        Interest expense                                7,648           6,672

           Loss before income taxes                   (20,983)        (62,887)

            Income taxes
        -         (10,251) (a)

               Net loss                                  $(20,983)
        $(52,636) (a)

            Net loss per common share                      $(0.63)
        $(1.58) (a)

        Weighted average number of shares outstanding  33,481          33,371

        (a)  Restated for adjustments to reflect the effect of the
             December 31, 1996 deferred tax valuation allowance in each


                                    (In thousands)

                                                           March 31,
                                                      1997           1996
        Current assets:
           Cash and cash equivalents                  $78,968         $1,393
           Inventories                                464,031        567,605
           Deferred income taxes                       11,800
16,187 (a)
           Other current assets                        11,181         33,179
               Total current assets                   565,980        618,364

        Property, net                                 249,854        305,532
        Goodwill                                            -         97,507
        Deferred income taxes                           1,200              -
        Other assets                                    6,217          6,022

        Total Assets                                 $823,251     $1,027,425


        Current liabilities:
           Revolver                                  $273,000       $296,000
           Accounts payable                           315,254        316,386
           Restructuring reserve                       10,735         31,391
           Other current liabilities                   66,725         68,371
               Total current liabilities              665,714        712,148

        Long-term debt                                122,774        110,000
        Other long-term liabilities                    53,174         55,266
        Deferred income taxes                               -
6,836 (a)

        Stockholders' equity (deficit):
           Common stock                                   343            343
           Additional paid-in capital                 253,849        254,350
               Accumulated deficit                       (259,632)
        (97,547) (a)

           Deferred compensation                       (7,998)        (8,998)
           Common stock subscriptions                  (4,973)        (4,973)
               Total stockholders' equity (deficit)   (18,411)       143,175

        Total Liabilities and Stockholders'
         Equity (Deficit)                            $823,251     $1,027,425

        (a) Adjusted to reflect the effect of the December 31,
            1996 deferred tax valuation allowance in each quarter.


                           SALES AND STORE DATA (UNAUDITED)
                       (Dollars and Square Footage in Millions)

                                      Three Months Ended March 31,
                                                             Percent of Total
                                1997      1996   % Change    1997      1996

          Superstores           $130.2    $133.9    (2.7)%     34.6%    34.9%
          Mall stores            243.1     246.4    (1.3)      64.6     64.2
          Total (a)              376.1     383.6    (2.0)     100.0    100.0
        Comparable store sales
         % change (b):
          Superstores              5.6%     (4.8)%   N/A       N/A      N/A
          Mall stores              1.8      (2.3)    N/A       N/A      N/A
          Total (a)                2.9      (2.9)    N/A       N/A      N/A
        Store count at end
         of period:
         Superstores               224       248    (9.7)      16.1     16.6
         Mall stores             1,147     1,224    (6.3)      82.4     81.9
         Total (a)               1,392     1,494    (6.8)     100.0    100.0
        Store square footage
         at end of period:
         Superstores               4.3       5.4   (21.4)      50.4     54.8
         Mall stores               4.1       4.4    (6.5)      48.9     44.6
         Total (a)                 8.4       9.9   (14.6)     100.0    100.0

        Superstores include Media Play and On Cue stores.
        Mall stores include Sam Goody/Musicland and Suncoast stores.

        (a) The totals include other divisions which individually are not
        (b) Comparable store sales percentages are computed for stores open
            a full year during the three-month periods ended March 31, 1997

SOURCE Musicland Stores Corporation/CONTACT: Beth Heming
(Media), 612-931-8040 or Jim Nermyr (Investors), 612-931-8007,
both of Musicland/