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EXHIBIT 99.1
[LOGO OF FACTORY CARD OUTLET]
Contact: James D. Constantine
Chief Financial Officer
(630) 579-2000
FOR IMMEDIATE RELEASE
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FACTORY CARD OUTLET ANNOUNCES DEVELOPMENTS IN
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BANKRUPTCY COURT PROCEEDINGS AND FIRST QUARTER RESULTS
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NAPERVILLE, IL, June 7, 2000 ---- Factory Card Outlet Corp. (FCPYQ) announced
today that it and the Creditors' Committee appointed in its Chapter 11 case have
entered into a non-binding letter of intent with Saunders, Karp & Megrue
("SKM"), a Connecticut based investment company, regarding a potential
transaction which would provide the Company with sufficient 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 following general
terms of a transaction and plan of reorganization in which SKM would invest
$19.5 million, for which it would receive a note and approximately 90% of the
common stock of the Company upon its emergence from Chapter 11. General
unsecured creditors, whose claims are estimated to be approximately $43 million,
would receive a cash distribution that may approximate $5 million, a note in the
approximate amount of $7 million, and approximately 10% of the common stock of
the Company upon its emergence from Chapter 11. Because the proposal would not
result in creditors recovering the full amount of their claims, it does not
contemplate that holders of the Company's outstanding common stock would receive
any distribution and, consequently, the existing stock would be cancelled.
The letter of intent provides for SKM to receive a break-up fee and expense
reimbursement in the event that the Company decides to pursue an alternative
transaction or course of action and restricts the Company's ability to solicit
alternative proposals. The letter of intent is subject to the approval by the
United States Bankruptcy Court for the District of Delaware, where the Company's
Chapter 11 case currently is pending.
The Company also announced that the Bankruptcy Court has granted the Company's
motion to extend the exclusive periods during which it may file a plan of
reorganization and solicit acceptances to such plan to July 31, 2000 and
September 29, 2000, respectively. There can be no assurance that the Company
will file a plan of reorganization during the exclusive period or that any such
plan will be confirmed.
The Company also reported a first quarter 2000 loss of $2.7 million, or $0.36
per share, compared with a net loss in the first quarter of 1999 of $16.1
million, or $2.14 per share. The 2000 first quarter loss before reorganization
costs associated with the Chapter 11 case and extraordinary items was $727
thousand, compared with a loss of $2.2 million a year ago.
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FACTORY CARD OUTLET PRESS RELEASE/JUNE 7, 2000/PAGE TWO
Net sales for the first quarter of 2000 were $54.4 million, compared with $52.5
million for the same period a year ago. Adjusting for store closings,
comparable store sales increased 11.8 percent. "This increase is attributed to
improved vendor relations resulting in better in-stock positions, new
merchandising initiatives, improved retail disciplines, and most importantly,
the dedicated efforts of our 3200 associates" commented William E. Freeman,
President and Chief Executive Officer. Mr. Freeman further said, "We are
hopeful that these events will lead to the Company's successful emergence from
chapter 11 by the Fall of this year."
Factory Card Outlet is a chain of company owned retail stores 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.
Saunders, Karp, & Megrue, a private merchant bank, currently manages over $1.5
billion of equity capital and pursues private company re-capitalizations and
growth buy-outs in the $40 million to $400 million range. To date, the firm has
invested in over 30 companies concentrated in retail, basic manufacturing,
consumer products, restaurant, financial services, and distribution industries.
Founded in 1990, the firm has offices in Manhattan, New York and Stamford,
Connecticut.
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 commencement 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.
[FINANCIAL TABLE TO FOLLOW]
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FACTORY CARD OUTLET CORP.
AND SUBSIDIARY
Consolidated Statements of Operations
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three fiscal months ended
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April 29, May 1,
2000 1999
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(Unaudited) (Unaudited)
<S> <C> <C>
Net sales $ 54,442 $ 52,533
Cost of sales 28,962 28,120
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Gross profit 25,480 24,413
Selling, general and administrative expenses 25,359 25,768
Interest expense 848 894
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Loss before reorganization items, income taxes and
extraordinary item (727) (2,249)
Reorganization items, net 2,011 12,547
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Loss before income taxes and extraordinary item (2,738) (14,796)
Income taxes - -
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Loss before extraordinary item (2,738) (14,796)
Extraordinary item-loss on early retirement
of debt - 1,292
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Net loss $ (2,738) $ (16,088)
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Loss per share - basic and diluted
Before extraordinary item $ (0.36) $ (1.97)
Extraordinary item (0.17)
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Net loss per share - basic and diluted $ (0.36) $ (2.14)
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Weighted average shares outstanding -
Basic and diluted 7,503,098 7,503,098
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EBITDAR (1) $ 2,025 $ 620
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</TABLE>
(1) Earnings before interest, taxes, depreciation and amortization, and
reorganization items.
