FACTORY CARD OUTLET LOGO Factory Card Outlet logo. (PRNewsFoto)[HD] NAPERVILLE, IL USA

    NAPERVILLE, Ill., June 7 /PRNewswire/ -- Factory Card Outlet Corp. (FCPYQ)
announced today that it and the Creditors' Committee appointed in its Chapter
11 case have entered into a non-binding letter of intent with Saunders, Karp &
Megrue ("SKM"), a Connecticut based investment company, regarding a potential
transaction which would provide the Company with sufficient funding to enable
it to emerge from Chapter 11.  The letter of intent is subject to, among other
things, the completion of due diligence, the execution of definitive
documentation, and confirmation of a plan of reorganization that would have to
be voted upon by creditors.  The letter of intent outlines the following
general terms of a transaction and plan of reorganization in which SKM would
invest $19.5 million, for which it would receive a note and approximately
90% of the common stock of the Company upon its emergence from Chapter 11.
General unsecured creditors, whose claims are estimated to be approximately
$43 million, would receive a cash distribution that may approximate
$5 million, a note in the approximate amount of $7 million, and approximately
10% of the common stock of the Company upon its emergence from Chapter 11.
Because the proposal would not result in creditors recovering the full amount
of their claims, it does not contemplate that holders of the Company's
outstanding common stock would receive any distribution and, consequently, the
existing stock would be cancelled.
    (Photo:  http://www.newscom.com/cgi-bin/prnh/19991220/FCPYLOGO )
    The letter of intent provides for SKM to receive a break-up fee and
expense reimbursement in the event that the Company decides to pursue an
alternative transaction or course of action and restricts the Company's
ability to solicit alternative proposals.  The letter of intent is subject to
the approval by the United States Bankruptcy Court for the District of
Delaware, where the Company's Chapter 11 case currently is pending.
    The Company also announced that the Bankruptcy Court has granted the
Company's motion to extend the exclusive periods during which it may file a
plan of reorganization and solicit acceptances to such plan to July 31, 2000
and September 29, 2000, respectively.  There can be no assurance that the
Company will file a plan of reorganization during the exclusive period or that
any such plan will be confirmed.
    The Company also reported a first quarter 2000 loss of $2.7 million, or
$0.36 per share, compared with a net loss in the first quarter of 1999 of
$16.1 million, or $2.14 per share.  The 2000 first quarter loss before
reorganization costs associated with the Chapter 11 case and extraordinary
items was $727 thousand, compared with a loss of $2.2 million a year ago.
    Net sales for the first quarter of 2000 were $54.4 million, compared with
$52.5 million for the same period a year ago.  Adjusting for store closings,
comparable store sales increased 11.8 percent.  "This increase is attributed
to improved vendor relations resulting in better in-stock positions, new
merchandising initiatives, improved retail disciplines, and most importantly,
the dedicated efforts of our 3200 associates" commented William E. Freeman,
President and Chief Executive Officer.  Mr. Freeman further said, "We are
hopeful that these events will lead to the Company's successful emergence from
chapter 11 by the Fall of this year."
    Factory Card Outlet is a chain of company owned retail stores offering a
vast assortment of party supplies, greeting cards, gift-wrap and other special
occasion merchandise at everyday value prices.  On March 23, 1999, the Company
filed a petition for reorganization under chapter 11 of title 11 of the United
States Code and is currently operating as a debtor in possession.
    Saunders, Karp, & Megrue, a private merchant bank, currently manages over
$1.5 billion of equity capital and pursues private company re-capitalizations
and growth buy-outs in the $40 million to $400 million range.  To date, the
firm has invested in over 30 companies concentrated in retail, basic
manufacturing, consumer products, restaurant, financial services, and
distribution industries.  Founded in 1990, the firm has offices in Manhattan,
New York and Stamford, Connecticut.

    Certain statements in this news release constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995.  Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company, or industry results, to be
materially different from any future results, performance, or achievements
express or implied by such forward-looking statements.  All forward-looking
statements relating to aspects of any plan of reorganization that may be
submitted in connection with the Chapter 11 case are dependent upon, among
other things, further improvements in the Company's store level operating
performance, the proposal of an acceptable reorganization plan and the
confirmation of such plan by the bankruptcy court.
    In general, the results, performance or achievements of the Company and
its stores and the value of the Company's common stock are dependent upon a
number of factors including without limitation, the impact of the commencement
of the Chapter 11 case; the ability to meet sales plans; weather and economic
conditions; dependence on key personnel; competition; ability to anticipate
merchandise trends and consumer demand; ability to maintain relationships with
suppliers; successful implementation of information systems; successful
handling of merchandise logistics; inventory shrinkage; ability to meet future
capital needs; governmental regulations; and other factors both referenced and
not referenced in the Company's filings with the Securities and Exchange
Commission.

                            FACTORY CARD OUTLET CORP.
                                  AND SUBSIDIARY

                      Consolidated Statements of Operations
               (Dollar amounts in thousands, except per share data)

                                                   Three fiscal months ended
                                                   April 29,        May 1,
                                                      2000           1999
                                                  (Unaudited)     (Unaudited)

    Net sales                                        $54,442        $52,533
    Cost of sales                                     28,962         28,120
      Gross profit                                    25,480         24,413
    Selling, general and administrative expenses      25,359         25,768
    Interest expense                                     848            894
      Loss before reorganization items, income
       taxes and extraordinary item                     (727)        (2,249)
    Reorganization items, net                          2,011         12,547
      Loss before income taxes and
       extraordinary item                             (2,738)       (14,796
    Income taxes                                          --             --
      Loss before extraordinary item                  (2,738)       (14,796)
    Extraordinary item-loss on early retirement
     of debt                                              --          1,292
    Net loss                                         $(2,738)      $(16,088)

    Loss per share - basic and diluted
      Before extraordinary item                       $(0.36)        $(1.97)
      Extraordinary item                                  --          (0.17)
        Net loss per share - basic and diluted       $(0.36)         $(2.14)

    Weighted average shares outstanding -
      Basic and diluted                            7,503,098      7,503,098

    EBITAR (A)                                        $2,025           $620

    (A)  Earnings before interest, taxes, deprecation and amortization, and
         reorganization items.

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