<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
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[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FACTORY CARD OUTLET CORP.
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(Name of Registrant as Specified In Its Charter)
FACTORY CARD OUTLET CORP.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Notes:
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[LOGO]
June 12, 1998
Dear Stockholders;
As most of you know by now, I have recently been elected President and
Chief Executive Officer of Factory Card Outlet by your Board of Directors. I am
succeeding Charles R. Cumello who is leaving the company to pursue other
opportunities. On behalf of the Board of Directors, I would like to thank
Charlie for all of his hard work and contributions to the company.
A copy of the press release announcing my election as President and Chief
Executive Officer and reporting Factory Card Outlet's first quarter results is
enclosed with this letter.
I am enthusiastic to be directly involved in the day-to-day operations of
Factory Card Outlet. Your management team believes in the concept and strategies
of Factory Card Outlet. We are confident that the direction of the company is
the correct one and will lead to enhanced shareholder value over the long term.
As we previously announced, the Board of Directors has postponed the
company's Annual Meeting of Stockholders scheduled for June 26, 1998 to a date
to be announced in the future. Please do not complete the proxy voting card
you've recently received. Proxy materials relating the rescheduled meeting will
be sent to you prior to such meeting.
I have always taken great pride in this organization, and I am convinced
that our future is brighter than ever. All of us at Factory Card Outlet
appreciate your support as stockholders and customers as we manage our business
toward continued profitable growth and expansion.
Stewart M. Kasen
Chairman and Chief Executive Officer
<PAGE>
[LOGO]
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 NAMES KASEN PRESIDENT
-----------------------------------------
AND CHIEF EXECUTIVE OFFICER:
----------------------------
REPORTS FIRST QUARTER RESULTS
-----------------------------
NAPERVILLE, IL, May 26, 1998 --- Factory Card Outlet Corp. (NASDAQ:FCPY)
announced today that Stewart M. Kasen, Chairman, has been named President and
Chief Executive Officer of this chain of superstores selling party supplies and
special occasion merchandise at everyday value prices.
Mr. Kasen, 58, has been Chairman of Factory Card Outlet since April, 1997 and a
Director of the Company since September, 1996. He has had a long and
distinguished retailing career, most recently as Chairman, President and Chief
Executive Officer of Best Products, a position he held from 1991 to 1996. Prior
to joining Best, he spent 24 years at Carter Hawley Hale as President and Chief
Executive Officer of Emporium Capwell, an $800 million division, and before
that, as President and Chief Executive Officer of its Thalhimer's division.
Mr. Kasen succeeds Charles R. Cumello, who has resigned as an officer and a
director of the Company to pursue other opportunities.
A spokesman for the Company's Board of Directors stated, "We are fortunate to
have a person of Stewart Kasen's caliber and experience leading the Company. He
has a terrific understanding of our business and industry. We, as a company,
are as excited about the future as we have ever been."
<PAGE>
FACTORY CARD OUTLET RELEASE OF MAY 26, 1998 CONTINUED/Page Two
The Company also announced today results for its first quarter ended May 2,
1998. Net income for the first quarter increased over 50% to $568,000 from
$375,000 last year. Fully diluted earnings per share increased 40% to $0.07
from $0.05. Sales for the first quarter rose 51.3% to $49.9 million from $32.9
million last year. On a comparable store basis, sales for the quarter rose
3.1%.
Mr. Kasen said, "Our comparable store sales were somewhat below expectations,
but our new store sales were ahead of plan due to earlier openings within the
quarter. Comparable store sales were impacted by system conversion issues
associated with the consolidation of our Bensenville distribution facilities
into our new Naperville center. The new distribution center will support our
future growth and improve efficiency, but, initially, there has been an uneven
flow of merchandise to our stores resulting in stock outs in certain basic
items. These system issues have been identified and are being corrected.
However we anticipate that this problem will adversely affect second quarter
earnings by up to $0.20 per share. The Wall Street consensus estimate, prior to
this announcement, had been for second quarter earnings per share of $0.27."
The Company further announced that its Annual Meeting of Stockholders, currently
scheduled for June 26, 1998, has been postponed to a date to be announced in the
future, because of Board composition issues related to Mr. Cumello's
resignation.
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
194 stores in 22 states.
This press release regarding the quarterly results of Factory Card Outlet Corp.
includes forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements do not constitute
historical facts and involve risks and uncertainties, including, but not limited
to, the possibility that adverse economic or other factors may cause actual
results to be materially different than current estimates and projections.
Additional detailed information concerning a number of factors that could cause
actual results to differ materially from the information contained in this press
release is readily available in the Company's Transition Report on Form 10-K.
Copies of this Transition Report are available on request directed to the
President of the Company.
(TABLE FOLLOWS)
<PAGE>
FACTORY CARD OUTLET CORP.
AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
May 2, January 31,
(In thousands) 1998 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 164 $ 30
Receivables 1,041 2,009
Inventories 79,097 72,911
Other current assets 1,912 2,105
----------- -----------
Total current assets 82,214 77,055
Fixed assets, net 40,134 38,507
Deferred Income Taxes 493 493
Other Assets 304 188
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Total assets $ 123,145 $ 116,243
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,892 $ 20,250
Accrued expenses 3,902 4,754
Other current liabilities 1,978 1,821
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Total current liabilities 27,772 26,825
Revolving credit note payable 34,968 29,700
Deferred rent liabilities 5,909 5,316
Other long-term liabilities 2,069 2,668
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Total liabilities 70,718 64,509
Total stockholders' equity 52,427 51,734
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Total liabilities and stockholders' equity $ 123,145 $ 116,243
=========== ===========
</TABLE>
<PAGE>
FACTORY CARD OUTLET CORP.
AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
First Quarter Ended
----------------------------
May 2, April 26,
(Dollars in thousands except for earnings per share data) 1998 1997
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<S> <C> <C>
Net sales $ 49,862 $ 32,946
Cost of sales and occupancy 32,183 20,459
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Gross profit 17,679 12,487
Selling, general and administrative expenses 15,951 11,713
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Income from operations 1,728 774
Interest expense 781 127
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Income before taxes 947 647
Income taxes 379 272
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Net income $ 568 $ 375
=========== ===========
Earnings per share
Basic $ 0.08 $ 0.05
=========== ===========
Diluted $ 0.07 $ 0.05
=========== ===========
Weighted average shares outstanding
Basic 7,354,386 7,210,791
=========== ===========
Diluted 8,096,974 7,988,643
=========== ===========
</TABLE>
