NAPERVILLE, Ill., Oct. 11 /PRNewswire/ -- Factory Card Outlet Corp.
(FCPYQ) announced today that the Company and the Creditors' Committee
appointed in its Chapter 11 case have entered into a non-binding letter of
intent with FCO Acquisition Corp. (FCOAC) regarding a potential transaction
which would provide the Company with 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 general terms of a transaction
and plan of reorganization in which FCOAC would invest $8 to $12 million in
equity and subordinated debt. FCOAC would receive notes and at least 85% of
the common stock of the Company upon its emergence from Chapter 11. General
unsecured creditors, whose claims are estimated to approximate $43 million,
would receive a total cash distribution approximating $6 million and notes in
the aggregate amount of $10 million. Both the cash distribution and the note
would be subject to downward adjustment under certain circumstances. Because
the proposal would not result in creditors recovering the full amount of their
claims, the letter of intent does not contemplate holders of the Company's
outstanding common stock receiving any distribution. Consequently the
existing stock would be cancelled.
( Photo: http://www.newscom.com/cgi-bin/prnh/19991220/FCPYLOGO )
The letter of intent provides for FCOAC to receive an expense
reimbursement of up to $750 thousand and a break up fee of $500 thousand under
certain circumstances, including in the event that the Company decides to
pursue an alternative transaction or course of action. The letter of intent
is subject to approval by the United States Bankruptcy Court for the District
of Delaware, where the Company's Chapter 11 case is pending.
The Company also announced that Saunders Karp & Megrue ("SKM"), which had
entered into a letter of intent with the Company and the Creditors' Committee
in June 2000, terminated its letter of intent. SKM indicated in its notice to
the Company that its termination of the letter of intent should not be deemed
as an indication that SKM has lost interest in pursuing a possible
transaction.
"The Company has turned the corner, is exceeding expectations and is well
positioned and ready to emerge from bankruptcy," said Chairman, Chief
Executive Officer and President, William E. Freeman. "Although the proposal
outlined in the FCOAC letter of intent contemplates a higher recovery to
creditors than was contemplated under the SKM letter of intent, the Company
will solicit and examine alternative proposals," he added. The Company has
retained The Avalon Group, Ltd. as its investment bankers and Conway, Del
Genio, Gries & Co., LLC as its financial advisors. Both firms are located in
New York.
The Company also reported second quarter 2000 net income of $303 thousand
or $.04 per share, compared with a net loss in the second quarter of 1999 of
$1.8 million, or $.23 per share. The second quarter 2000 income before
reorganization costs associated with the Chapter 11 case was $1.7 million
compared with an income of $249 thousand a year ago.
Net sales for the second quarter of 2000 increased 13.8 percent to
$59.4 million, compared with $52.2 million for the same period a year ago.
"We continued the positive sales momentum with strong sales in our greeting
card, party, gift and seasonal businesses," said Freeman.
The Company reported a first half 2000 net loss of $2.4 million or
$.32 per share, compared with a net loss in the first half of 1999 of
$17.8 million, or $2.38 per share. The 2000 first half income before
reorganization costs associated with the Chapter 11 case and extraordinary
loss was $939 thousand, compared with a loss of $2.0 million a year ago.
Net sales for the first half of 2000 were $113.9 million compared with
$104.8 million for the same period a year ago. Comparable store sales for
the first half increased 12.8 percent over a year ago after adjusting for
closed stores in the first quarter of 1999. Turning to the outlook, Freeman
said, "As we approach the fall and holiday seasons we are confident our
merchandising assortment, in stock position and vendor support will allow the
company to achieve solid financial performance."
Factory Card Outlet operates 177 company owned retail stores, in 20
states, 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.
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 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 Six fiscal months ended
July 29, July 31, July 29, July 31,
2000 1999 2000 1999
(Unaudited) (Unaudited)
Net sales $59,426 $52,234 $113,868 $104,767
Cost of sales 30,611 26,421 59,573 54,541
Gross profit 28,815 25,813 54,295 50,226
Selling, general and
administrative
expenses 26,392 24,982 51,751 50,750
Interest expense 757 582 1,605 1,476
Income (loss) income
before reorganization
items, income taxes
and extraordinary
loss 1,666 249 939 (2,000)
Reorganization items, net 1,363 2,009 3,374 14,556
Income (loss) before
income taxes and
extraordinary loss 303 (1,760) (2,435) (16,556)
Income taxes - - - -
Income (loss) before
extraordinary loss 303 (1,760) (2,435) (16,556)
Extraordinary loss on
early retirement
of debt - - - 1,292
Net income (loss) $303 $(1,760) $(2,435) $(17,848)
Income (loss) per share
-- basic and diluted
Before extraordinary loss $0.04 $(0.23) $(0.32) $(2.21)
Extraordinary loss - - - (0.17)
Net income (loss) per share
-- basic & diluted $0.04 $(0.23) $(0.32) $(2.38)
Weighted average shares
outstanding -
Basic/diluted 7,503,098 7,503,098 7,503,098 7,503,098
EBITDAR (1) $4,219 $2,695 $6,244 $3,220
(1) Earnings before interest, taxes, depreciation and amortization,
reorganization items and extraordinary loss.
SOURCE Factory Card Outlet Corp.
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NewsCom:
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PRN Photo Desk, 888-776-6555 or 201-369-3467
CONTACT:
James D. Constantine, Chief Financial Officer
of Factory Card Outlet Corp., 630-579-2000
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