<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
November 24, 1998
-----------------
Date of Report (Date of earliest event reported)
Factory Card Outlet Corp.
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(Exact name of registrant as specified in its charter)
Delaware 21859 36-3652087
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2727 Diehl Road, Naperville, Illinois 60563
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(address of principal executive offices) (Zip Code)
(630) 579-2000
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(Registrant's telephone number)
<PAGE>
Item 5. Other Events.
On November 24, 1998, Factory Card Outlet Corp. (the "Registrant")
announced its third quarter results and indicated that it is revising its
performance expectations for the fourth quarter and year ended January 30, 1999.
A copy of the Registrant's press release, dated November 24, 1998, is
attached hereto as Exhibit 99.1 and is incorporated by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------- -----------
<S> <C>
99.1 Press Release of Factory Card Outlet Corp. issued November 24,
1998.
</TABLE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FACTORY CARD OUTLET CORP.
/s/ Stewart M. Kasen
-----------------------------------------
Stewart M. Kasen
Dated: November 24, 1998 President and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------- -----------
<S> <C>
99.1 Press Release of Factory Card Outlet Corp. issued November 24,
1998
</TABLE>
<PAGE>
Exhibit 99.1
Contact: Tom Stoltz Carol Travis
Factory Card Outlet Factory Card Outlet
Vice President/Finance Vice President/Secretary
(630) 579-2230 (630) 579-2288
FOR IMMEDIATE RELEASE
---------------------
FACTORY CARD OUTLET REPORTS THIRD QUARTER RESULTS
-------------------------------------------------
NAPERVILLE, IL, November 24, 1998 -- 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.
<PAGE>
FACTORY CARD OUTLET CORP. THIRD QUARTER RESULTS/Page Two
"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.
[FINANCIAL TABLES TO FOLLOW]
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FACTORY CARD OUTLET CORP.
AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
October 31, January 31,
(In thousands) 1998 1998
----------- -----------
<S> <C> <C>
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
======== ========
</TABLE>
<PAGE>
FACTORY CARD OUTLET CORP.
AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands except for earnings per share and share data)
Third Quarter Ended Nine Months Ended
------------------------ -------------------------
October 31, October 25, October 31, October 25,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
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
=========== =========== =========== ===========
</TABLE>
