NAPERVILLE, Ill., Nov. 24 /PRNewswire/ -- Factory Card Outlet Corp.
(Nasdaq: FCPY) announced today results for its third quarter ended October 31,
1998.
Net loss for the third quarter was $2.6 million or $0.35 per fully diluted
share compared to a net loss of $1.8 million or $0.25 per fully diluted share
last year. Sales for the third quarter rose 40.0% to $57.7 million from
$41.2 million last year. On a comparable store basis, sales for the quarter
rose 1.5%.
For the nine months ended October 31, 1998, the Company reported a net
loss of $2.8 million or $0.38 per diluted share compared to net income of
$371,000 or $0.05 per fully diluted share last year. Sales increased by 41.0%
to $162.3 million from $115.1 million last year. Comparable store sales for
the nine month period increased by 1.9%.
Stewart M. Kasen, the Company's Chairman, President, and Chief Executive
Officer, said, "Although we experienced strong sales momentum during the first
two months of this quarter, our Halloween sales were significantly below
expectations. Our comparable store sales decreased during October by 5.9%
compared to last year. Roughly half of our merchandise preparation for the
1998 Halloween season was carried over from last year. That merchandise did
not sell well and it was necessary to heavily price discount in order to
clear. As our new strategy dictates, we have exited Halloween this year with
substantially less carryover than last year."
"As a result of our lower than expected sales, we are continuing to reduce
our overall corporate administrative expenses. We are also taking several
steps in an effort to improve our liquidity position. These steps include:
engaging in discussions with our landlords to renegotiate certain leases,
including the signed leases for our previously planned 14 new store openings
for fiscal 1999; evaluating the disposition of certain stores; engaging in
discussions with the lenders under our senior credit facilities in an effort
to increase our borrowing capacity under such facilities; exploring additional
and/or replacement sources of debt financing; and discussing payment terms
with certain major suppliers. We are actively pursuing each of these steps in
an effort to generate sufficient liquidity to meet our financial obligations
and position the Company for a return to profitable growth during fiscal
1999," Mr. Kasen said.
"Based on our current trends, we do not expect to achieve current analyst
expectations for the fourth quarter. We now expect comparable sales increases
in the low to mid single-digits and only marginal net income in the fourth
quarter. Finally, we do not anticipate opening any new stores in fiscal
1999," Mr. Kasen said.
Factory Card Outlet is a chain of company-owned superstores offering a
vast assortment of party supplies, greeting cards, gift wrap and other special
occasion merchandise at everyday value prices. The Company currently operates
213 company-owned stores in 23 states.
Certain statements in this news release may 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 or
achievements expressed or implied thereby to be materially different from such
forward-looking statements. Such factors include, among others, the
following: the success of efforts to renegotiate the Company's senior credit
facilities; store performance; 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; availability and cost of capital; government
regulations; ability to complete corrective action necessary to address Year
2000 issues and other factors both referenced and not referenced in the
Company's Transition Report on Form 10-K and the Company's other filings with
the Securities and Exchange Commission. In particular, the Company is
attempting to amend its senior credit facilities to increase the borrowing
capacity under such facilities. The Company is also exploring the refinancing
of its senior credit facilities and/or the raising of funds through the
incurrence of additional debt. There can be no assurance that the Company
will be successful in such efforts. Any such efforts may (i) increase the
Company's cost of capital, (ii) result in equity dilution to the holders of
the Company's common stock, (iii) increase the Company's vulnerability to
general adverse economic and industry conditions, (iv) limit the Company's
ability to obtain additional financing to fund future working capital and
capital expenditure needs, (v) limit the Company's flexibility in planning for
changes in its business and industry, and (vi) place the Company at a
competitive disadvantage vis-a-vis less leveraged competitors. The Company's
current liquidity position may also adversely affect its relationship with its
suppliers which could have a material adverse effect on the Company's
business, financial condition and results of operations.
FACTORY CARD OUTLET CORP.
AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
October 31, January 31,
(In thousands) 1998 1998
ASSETS
Current assets:
Cash $263 $30
Receivables 168 796
Inventories 96,359 72,911
Other current assets 3,806 2,105
Total current assets 100,596 75,842
Fixed assets, net 41,778 38,507
Deferred income taxes 493 493
Other assets 1,184 188
Total assets $144,051 $115,030
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $30,673 $19,037
Accrued expenses 6,383 4,754
Other current liabilities 2,213 1,821
Total current liabilities 39,269 25,612
Revolving credit note payable 36,353 29,700
Term loan 9,585 --
Deferred rent liabilities 7,000 5,316
Other long-term liabilities 2,162 2,668
Total liabilities 94,369 63,296
Total stockholders' equity 49,682 51,734
Total liabilities and
stockholders' equity $144,051 $115,030
FACTORY CARD OUTLET CORP.
AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands except
for earnings per share
and share data)
Third Quarter Ended Nine Months Ended
Oct. 31, Oct. 25, Oct. 31, Oct. 25,
1998 1997 1998 1997
Net sales $57,715 $41,232 $162,326 $115,097
Cost of sales
and occupancy 39,986 26,849 108,492 72,184
Gross profit 17,729 14,383 53,834 42,913
Selling, general
and administrative
expenses 20,627 16,913 54,762 41,361
Special charge -- -- 655 --
Income (loss) from
operations (2,898) (2,530) (1,583) 1,552
Interest expense 1,442 466 3,136 760
Income (loss)
before taxes (4,340) (2,996) (4,719) 792
Income taxes (benefit) (1,736) (1,199) (1,888) 421
Net income (loss) $(2,604) $(1,797) $(2,831) $371
Earnings (loss) per share
Basic $(0.35) $(0.25) $(0.38) $0.05
Diluted $(0.35) $(0.25) $(0.38) $0.05
Weighted average
shares outstanding
Basic 7,445,579 7,236,826 7,395,054 7,223,970
Diluted 7,445,579 7,236,826 7,395,054 7,954,337
SOURCE Factory Card Outlet
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CONTACT:
Tom Stoltz, Vice President-Finance,
630-579-2230, or Carol Travis, Vice President-Secretary,
630-579-2288, both of Factory Card Outlet
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