EXHIBIT 99.1
FACTORY CARD & PARTY OUTLET LOGO
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WE MAKE EVERY OCCASSION SPECIAL
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 PROCEEDING AND SECOND QUARTER RESULTS
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NAPERVILLE, IL, OCTOBER 11, 2000 - Factory Card Outlet Corp. (FCPYQ) announced
today that the Company and the Creditors' Committee appointed in its Chapter 11
case have entered into a non-binding letter of intent with FCO Acquisition Corp.
(FCOAC) regarding a potential transaction which would provide the Company with
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
general terms of a transaction and plan of reorganization in which FCOAC would
invest $8 to $12 million in equity and subordinated debt. FCOAC would receive
notes and at least 85% of the common stock of the Company upon its emergence
from Chapter 11. General unsecured creditors, whose claims are estimated to
approximate $43 million, would receive a total cash distribution approximating
$6 million and notes in the aggregate amount of $10 million. Both the cash
distribution and the note would be subject to downward adjustment under certain
circumstances. Because the proposal would not result in creditors recovering the
full amount of their claims, the letter of intent does not contemplate holders
of the Company's outstanding common stock receiving any distribution.
Consequently the existing stock would be cancelled.
The letter of intent provides for FCOAC to receive an expense reimbursement of
up to $750 thousand and a break up fee of $500 thousand under certain
circumstances, including in the event that the Company decides to pursue an
alternative transaction or course of action. The letter of intent is subject to
approval by the United States Bankruptcy Court for the District of Delaware,
where the Company's Chapter 11 case is pending.
The Company also announced that Saunders Karp & Megrue ("SKM"), which had
entered into a letter of intent with the Company and the Creditors' Committee in
June 2000, terminated its letter of intent. SKM indicated in its notice to the
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Company that its termination of the letter of intent should not be deemed as an
indication that SKM has lost interest in pursuing a possible transaction.
"The Company has turned the corner, is exceeding expectations and is well
positioned and ready to emerge from bankruptcy," said Chairman, Chief Executive
Officer and President, William E. Freeman. "Although the proposal outlined in
the FCOAC letter of intent contemplates a higher recovery to creditors than was
contemplated under the SKM letter of intent, the Company will solicit and
examine alternative proposals," he added. The Company has retained The Avalon
Group, Ltd. as its investment bankers and Conway, Del Genio, Gries & Co., LLC as
its financial advisors. Both firms are located in New York.
FACTORY CARD OUTLET PRESS RELEASE/OCTOBER 11, 2000/PAGE TWO
The Company also reported second quarter 2000 net income of $303 thousand or
$.04 per share, compared with a net loss in the second quarter of 1999 of $1.8
million, or $.23 per share. The second quarter 2000 income before reorganization
costs associated with the Chapter 11 case was $1.7 million compared with an
income of $249 thousand a year ago.
Net sales for the second quarter of 2000 increased 13.8 percent to $59.4
million, compared with $52.2 million for the same period a year ago. "We
continued the positive sales momentum with strong sales in our greeting card,
party, gift and seasonal businesses," said Freeman.
The Company reported a first half 2000 net loss of $2.4 million or $.32 per
share, compared with a net loss in the first half of 1999 of $17.8 million, or
$2.38 per share. The 2000 first half income before reorganization costs
associated with the Chapter 11 case and extraordinary loss was $939 thousand,
compared with a loss of $2.0 million a year ago.
Net sales for the first half of 2000 were $113.9 million compared with $104.8
million for the same period a year ago. Comparable store sales for the first
half increased 12.8 percent over a year ago after adjusting for closed stores in
the first quarter of 1999. Turning to the outlook, Freeman said, "As we approach
the fall and holiday seasons we are confident our merchandising assortment, in
stock position and vendor support will allow the company to achieve solid
financial performance."
Factory Card Outlet operates 177 company owned retail stores, in 20 states,
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.
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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 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 Six fiscal months ended
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July 29, July 31, July 29, July 31,
2000 1999 2000 1999
---------------- ----------------- ---------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 59,426 $ 52,234 $ 113,868 $ 104,767
Cost of sales 30,611 26,421 59,573 54,541
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Gross profit 28,815 25,813 54,295 50,226
Selling, general and administrative expenses 26,392 24,982 51,751 50,750
Interest expense 757 582 1,605 1,476
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Income (loss) before reorganization
items, income taxes and extraordinary
loss 1,666 249 939 (2,000)
Reorganization items, net 1,363 2,009 3,374 14,556
---------------- ----------------- ---------------- ----------------
Income (loss) before income taxes and
extraordinary loss 303 (1,760) (2,435) (16,556)
Income taxes - - - -
---------------- ----------------- ---------------- ----------------
Income (loss) before extraordinary loss 303 (1,760) (2,435) (16,556)
Extraordinary loss on early retirement of debt
- - - 1,292
---------------- ----------------- ---------------- ----------------
Net income (loss) $ 303 $ (1,760) $ (2,435) $ (17,848)
================ ================= ================ ================
Income (loss) per share - basic and diluted
Before extraordinary loss $ 0.04 $ (0.23) (0.32) $ (2.21)
$
Extraordinary loss - - - (0.17)
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Net income (loss) per share - basic & diluted $ 0.04 $ (0.23) $ (0.32) $ (2.38)
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Weighted average shares outstanding -
Basic/diluted 7,503,098 7,503,098 7,503,098 7,503,098
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EBITDAR (1) $ 4,219 $ 2,695 $ 6,244 $ 3,220
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</TABLE>
(1) Earnings before interest, taxes, depreciation and amortization,
reorganization items and extraordinary loss.
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