SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One):
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED). For the fiscal year ended
December 31, 1996.
TRANSACTION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED). For the transaction period from
to .
Commission file number: 21859.
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Factory Card Outlet of America Ltd. Incentive Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Factory Card Outlet Corp.
745 Birginal Drive
Bensenville, Illinois 60106-1212
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Required Information
Item 4
In lieu of the financial statements required by Item 1-3, the Plan is
submitting financial statements prepared in accordance with the financial
reporting requirements of ERISA for the fiscal years ended December 31, 1996 and
December 31, 1995.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Plan administrators have duly caused this annual report to be signed on behalf
of the Plan by the undersigned, thereunto duly authorized.
Date: June 27, 1997 FACTORY CARD OUTLET OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
By:
-------------------------------
Matthew Ellis
Plan Administrator
By:
-------------------------------
Glen J. Franchi
Plan Administrator
By:
-------------------------------
Jeffrey Kelly
Plan Administrator
By:
-------------------------------
Carol A. Travis
Plan Administrator
3
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FACTORY CARD OUTLET OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
TABLE OF CONTENTS
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Page(s)
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Independent Auditors' Report............................... 5
Statements of Net Assets Available
for Plan Participants.................................... 6
Statements of Changes in Net Assets Available
for Plan Participants.................................... 7
Notes to Financial Statements.............................. 8-12
Schedule
--------
Item 27a - Schedule of Assets Held for Investment Purposes. 1 13
Item 27d - Schedule of Reportable Transactions............. 2 14
4
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Independent Auditors' Report
The Retirement Committee
Factory Card Outlet of America Ltd.
Incentive Savings Plan:
We have audited the accompanying statements of net assets available for plan
participants of Factory Card Outlet of America Ltd. Incentive Savings Plan as of
December 31, 1996 and 1995, and the related statements of changes in net assets
available for plan participants for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan participants of the
Plan as of December 31, 1996 and 1995, and the changes in net assets available
for plan participants for the years then ended in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules are presented
for the purpose of additional analysis and are not a required part of the basic
financial statements, but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental schedules
have been subjected to the auditing procedures applied in the audits of the
basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
The schedule of assets held for investment purposes and schedule of reportable
transactions that accompany the Plan's financial statements do not disclose the
historical cost of certain Plan assets held by the Plan trustee. Disclosure of
this information is required by the Department of Labor's Rules and Regulations
for Reporting and Disclosure under the Employee Retirement Income Security Act
of 1974.
KPMG PEAT MARWICK LLP
Chicago, Illinois
February 28, 1997
5
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FACTORY CARD OUTLET OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
Statements of Net Assets Available for Plan Participants
December 31, 1996 and 1995
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1996 1995
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Assets:
Cash and cash equivalents $ 78,571 70
Investments:
Bank One, Chicago NA pooled investment funds:
Income fund, at fair value 330,989 289,642
Equity fund, at fair value 620,829 383,174
Guaranteed principal fund, at contract value 415,794 324,099
Participant loans 111,968 52,935
Receivables:
Employer contributions 7,897 7,134
Employee contributions 28,613 25,589
Accrued income 2,797 2,623
Miscellaneous -- 3,913
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Total assets 1,597,458 1,089,179
Liabilities - refund of excess employee contributions 10,398 843
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Net assets available for plan participants $1,587,060 1,088,336
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See accompanying notes to financial statements.
6
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FACTORY CARD OUTLET OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
Statements of Changes in Net Assets Available for Plan Participants
Years ended December 31, 1996 and 1995
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1996 1995
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Additions to net assets attributed to:
Investment income:
Net investment income $ 35,139 55,192
Net appreciation
in market value of investments 87,738 55,032
Interest income on participant loans 3,872 4,037
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126,749 114,261
Contributions:
Employer 102,029 65,934
Employee 373,245 234,710
Rollover 51,769 5,212
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Total additions 653,792 420,117
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Deductions from net assets attributed to:
Vested benefits of terminated participants (143,520) (55,514)
Refund of excess employee contributions (10,398) (843)
Hardship withdrawals (1,150) --
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Total deductions (155,068) (56,357)
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Net increase 498,724 363,760
Net assets available for plan participants:
Beginning of year 1,088,336 724,576
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End of year $ 1,587,060 1,088,336
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See accompanying notes to financial statements.
7
<PAGE>
FACTORY CARD OUTLET OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
Notes to Financial Statements
December 31, 1996 and 1995
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(1) Description of the Plan
The following brief description of the Factory Card Outlet of America
Ltd. Incentive Savings Plan (Plan) is provided for general information
purposes only. Participants should refer to the Plan agreement for more
complete information.
The Plan is a defined contribution plan sponsored by Factory Card Outlet
of America Ltd. (Company) for all eligible employees, as defined in the
Plan agreement. The Plan as adopted by the Company is a profit sharing
plan with a cash or deferred savings feature. The Plan is administered
by the Company and is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA). Bank One, Chicago NA
serves as the Plan's trustee and investment manager.
Each participant is 100% vested in his or her salary reduction
contribution, the Company's discretionary matching contributions, and
actual earnings thereon at all times. Vesting in the Company's
discretionary base contributions is based on years of continuous
service. A participant is 100% vested after five years of credited
service or upon death, disability, or the attainment of normal
retirement age. Payments are generally made on a lump-sum basis upon
termination.
Upon satisfaction of certain conditions and approval of the plan
administrator, participants may request and receive loans of up to 50%
of their vested contribution account balance. Such loans bear interest
at the prime rate in effect at the time of issuance plus one percent and
are repaid through payroll deductions.
A participant's retirement account is credited with the Company's
discretionary matching and base contributions, the salary reduction
contribution, and allocations of forfeitures and plan earnings.
Allocations are based upon participant earnings and account balances as
defined. Participants are also able to rollover balances from other
qualified plans. The benefit to which a participant is entitled is the
benefit that can be provided from a participant's account.
Forfeitures become available for allocation when a terminated
participant incurs five consecutive one-year breaks in service, as
defined in the Plan, or receives a distribution of the vested portion of
the discretionary base contribution account. Amounts which are forfeited
will be allocated among the remaining participants in the Plan. As of
the last day of each plan year, forfeitures are allocated among active
participants in the ratio of each participant's compensation during the
year to the total plan compensation during the year.
(2) Summary of Significant Accounting Policies
A summary of the Plan's significant accounting policies, which have been
consistently applied in the preparation of the accompanying financial
statements on the accrual basis of accounting, is as follows:
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company to make estimates
and assumptions that affect the reported amounts of net assets available
for plan participants and disclosure of commitments at the date of the
financial statements and the changes in net assets available for plan
participants during the reporting periods. Actual results could differ
from those estimates.
(Continued)
8
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FACTORY CARD OUTLET OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
Notes to Financial Statements
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Investments
Investments are stated at fair value except for the guaranteed principal
fund which is stated at contract value. Changes in the fair value of
securities held are reported as unrealized appreciation or depreciation
in market value of investments in the accompanying statements of changes
in net assets available for plan participants.
Purchases and sales of investments are recorded on a trade-date basis.
Participant loans are valued at the outstanding principal balance.
Since November 15, 1996, the Plan has offered four alternative
investment options - the income fund, the equity fund, the guaranteed
principal fund, and a Factory Card Outlet Corp. common stock fund.
Participants may direct that their salary reduction contributions and
their appropriate share of Company contributions be invested in one or
all of these funds in increments of one percent (1%). Prior to November
15, 1996, the Plan offered only three alternative investment options -
the income fund, the equity fund and the guaranteed principal fund.
Participants were able to invest in one or all of these funds in
increments of ten percent (10%).
Contributions
The Plan provides for employee contributions from eligible participants
electing to enter into a Salary Reduction Agreement with the Company.
Under this feature of the Plan, a participant may elect to contribute a
percentage of his or her compensation ranging between one percent (1%)
and thirteen percent (13%) in increments of one percent (1%).
The Company makes a discretionary matching contribution to the Plan and
the Retirement Committee allocates this contribution to the separate
participant accounts. Only those participants who have made salary
reduction contributions and have completed 1,000 hours of service will
receive this allocation. The Company allocated the discretionary
matching contribution to an individual participant's account at the rate
of 33% of the first six percent (6%) of a participant's salary reduction
contribution in 1996 and 1995.
A discretionary base contribution may be made by the Company only if it
has current or accumulated net profits. The Company determines the
amount, if any, and the Retirement Committee allocates this contribution
to the accounts of participants who were employed by the Company on the
last day of the Plan year. The base contribution is allocated in
proportion to each participant's compensation for the Plan year in
relation to the total compensation of all participants for the Plan
year. No base contribution was made in 1996 or 1995.
Rollover contributions result from participants transferring funds from
unrelated retirement plans.
Income Tax Status
The Plan obtained a favorable determination letter on April 6, 1994, in
which the Internal Revenue Service stated that the Plan, as then
designed, was in compliance with the applicable requirements of the
Internal Revenue Code. The Plan has been amended since receiving the
determination letter. However, the Plan Administrator believes that the
Plan is currently designed and being operated in compliance with the
applicable requirements of the Internal Revenue Code. Therefore, no
provision for income taxes has been included in the Plan's financial
statements.
The Plan Administrator is not aware of any activity or transactions that
may adversely affect the qualified status of the Plan.
(Continued)
9
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FACTORY CARD OUTLET OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
Notes to Financial Statements
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Administrative Expenses
All expenses pertaining to the operation of the Plan are paid by the
Company and are not charged against the assets or income of the Plan. In
addition, various administrative, legal, and accounting services are
performed by Company personnel on behalf of the Plan. No charges are
made to the Plan for these services.
Cash and Cash Equivalents
Cash equivalents consist principally of highly liquid government
securities with original maturities of three months or less.
(3) Contributions Receivable
Amounts receivable from employer and employees as of December 31, 1996
and 1995 represent contributions related to December payroll. These
contributions were received by the Plan in January of the following
year.
(4) Plan Termination
While the Company has not expressed any intent to terminate the Plan or
to discontinue contributions, it is free to do so at any time, subject
to the provisions set forth in ERISA. Should the Plan be terminated at
some future time, all participants become 100% vested in benefits earned
as of the termination date.
(5) Investments
Investments which represent 5% or more of the Plan's net assets at
December 31, 1996 and 1995 are separately identified below.
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1996 1995
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Income fund, at fair value $ 330,989 289,642
Equity fund, at fair value 620,829 383,174
Guaranteed principal fund, at contract value 415,794 324,099
Participant loans 111,968 52,935
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Total $1,479,580 1,049,920
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(Continued)
10
<PAGE>
FACTORY CARD OUTLET OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
Notes to Financial Statements
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During 1996 and 1995, the Plan's investments (including investments
bought, sold, and held during the year) appreciated (depreciated) as
follows:
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Year ended Year ended
December 31, December 31,
1996 1995
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Income fund $ (6,994) 18,834
Equity fund 74,347 24,854
Guaranteed principal fund 20,385 11,344
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Net unrealized appreciation
on investments $ 87,738 55,032
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(6) Summary of Net Assets and Changes
in Net Assets by Fund
A summary of changes in net assets by fund type for the year ended
December 31, 1996 is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Factory Card
Guaranteed Outlet Corp.
Income Equity principal Participant common
fund fund fund loans stock Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Net investment income $ 21,330 13,506 303 -- -- 35,139
Net appreciation (depreciation) in
market value of investments (6,994) 74,347 20,385 -- -- 87,738
Interest income on participant loans 543 1,173 2,156 -- -- 3,872
Contributions:
Employer 22,180 45,462 34,338 -- 49 102,029
Employee 80,347 165,163 127,500 -- 235 373,245
Rollover 19,337 29,963 2,469 -- -- 51,769
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Total additions 136,743 329,614 187,151 -- 284 653,792
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Deductions from net assets attributed to:
Vested benefits of
terminated participants (31,056) (71,491) (40,973) -- -- (143,520)
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Refund of excess
employee contributions (6,370) (2,387) (1,641) -- -- (10,398)
Hardship withdrawals -- (575) (575) -- -- (1,150)
Total deductions (37,426) (74,453) (43,189) -- -- (155,068)
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Fund transfers (19,825) 26,853 (79,487) 59,033 13,426 --
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Net increase 79,492 282,014 64,475 59,033 13,710 498,724
Net assets available for plan participants:
Beginning of year 297,351 398,138 339,912 52,935 -- 1,088,336
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End of year $ 376,843 680,152 404,387 111,968 13,710 1,587,060
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</TABLE>
(Continued)
11
<PAGE>
Schedule 1
FACTORY CARD OUTLET OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1996
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Description Cost* Value
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Cash and cash equivalents $ 78,571
Bank One, Chicago NA pooled
investment funds:
Income fund 330,989
Equity fund 620,829
Guaranteed principal fund 415,794
Participant loans (varying rates of
interest from 8% to 8.5%) 111,968
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$ 1,558,151
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*Historical cost information is not available.
See accompanying independent auditors' report.
13
<PAGE>
Schedule 2
FACTORY CARD OUTLET OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
Item 27d - Schedule of Reportable Transactions
December 31, 1996
<TABLE>
<CAPTION>
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Current value
Purchase Selling Cost of (as of date Net
price price investment of transaction) gain
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bank One, Chicago NA Income Fund:
Series of purchases $ 545,410 545,410
Series of sales 488,122 * 488,122 *
Bank One, Chicago NA Equity Fund:
Series of purchases 1,665,271 1,665,271
Series of sales 1,386,261 * 1,386,261 *
Bank One, Chicago NA Guaranteed
Principal Fund:
Series of purchases 389,492 389,492
Series of sales 349,548 * 349,548 *
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
*Historical cost information is not available.
See accompanying independent auditors' report.
14
