<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 2 TO ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 28, 1995 Commission File No. 1-6695
FABRI-CENTERS OF AMERICA, INC.
(Exact name of Registrant as specified in its charter)
OHIO 34-0720629
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization Identification Number)
5555 DARROW RD.
HUDSON, OHIO 44236
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 656-2600
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Class on Which Registered
Common Stock, Without Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
6.25% Convertible Subordinated Debentures Due 2002 New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
The exhibit index begins on Page 37.
Documents incorporated by reference: None
Sequential page 1 of 38
<PAGE> 2
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except where otherwise noted, Management's Discussion and Analysis of
Financial Condition and Results of Operations pertains to the Company's
continuing operations.
On October 2, 1994, the Company acquired substantially all of the
assets of Cloth World, a division of Brown Group Inc. ("Cloth World") for
approximately $97 million in cash and assumed liabilities. The funds used to
acquire Cloth World were provided by internally generated funds and borrowings
under a credit facility. The acquisition has been recorded using the purchase
method, and accordingly, the results of operations of Cloth World have been
included in the Company's consolidated financial statements since the date of
acquisition. The purchase price allocation has been based on preliminary
estimates. Certain estimates, primarily for costs related to closing certain
acquired stores and settling related lease obligations, may be revised based
upon information that will be obtained during fiscal 1996. However, the effect
of any revisions on the results of operations for fiscal 1995 would not be
material.
RESULTS OF OPERATIONS
The following table shows the percentage of net sales for the periods
indicated and the percentage change in dollar amounts from period to period of
certain items included in the Consolidated Statements of Income.
<TABLE>
<CAPTION>
Percentage Change
Percentage of Net Sales From Prior Year
-----------------------------------------------------------
1995 1994 1993 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 16.4% 1.4%
Cost of goods sold 55.9 56.7 57.3 14.7 0.3
Selling, general and administrative
expenses 40.0 40.4 40.3 15.2 1.8
Interest expense, net 1.3 1.0 1.0 51.8 0.5
---- ---- ----
Total expenses 97.2 98.1 98.6 15.3 0.9
---- ---- ----
Earnings from continuing operations before
income taxes, extraordinary item and
cumulative effect of accounting change 2.8 1.9 1.4 71.4 34.5
Income taxes 1.1 0.7 0.5 75.9 34.5
---- ---- ----
Earnings from continuing operations before
extraordinary item and cumulative effect of
accounting change 1.7% 1.2% 0.9% 68.6% 34.5%
==== ==== ====
</TABLE>
Page 2
<PAGE> 3
Net sales for fiscal 1995 increased 16.4%, or $95.2 million, to $677.3
million from $582.1 million in fiscal 1994, largely due to $86.2 million of
sales generated from the Cloth World stores in the last seventeen weeks of the
year. Fiscal 1995 net sales, excluding the Cloth World stores, increased $9.0
million, or 1.5%. Comparable store sales, which decreased during the first half
of fiscal 1995 as a result of lower levels of promotional discounting, improved
during the remainder of the year achieving an increase on a full-year basis of
1.0% over the prior year. The increase is primarily attributable to implementing
a plan to improve customer service, enhance store presentation, and expand
product assortment. In fiscal 1995, the Company opened 38 superstores, acquired
342 Cloth World stores and closed 71 stores, many of which were in overlapping
market areas, ending the year with 964 stores in operation, of which 804 were
superstores. Fiscal 1996 net sales are expected to be significantly higher than
in fiscal 1995 due to the acquisition of the Cloth World stores.
Net sales for fiscal 1994 increased 1.4%, or $8.0 million, to $582.1
million compared to $574.1 million in fiscal 1993. The increase is primarily
attributable to sales increases generated from a larger base of superstores that
had been in operation for a full year, offset in part, by a moderation in sales
promotion activity. In fiscal 1994, the Company opened 27 stores and closed 65
stores, ending the year with 502 superstores compared to 486 superstores at the
end of fiscal 1993.
Gross profit as a percentage of net sales was 44.1% in fiscal 1995,
43.3% in fiscal 1994, and 42.7% in fiscal 1993. The improvement in gross profit
margins over the past two years primarily resulted from better management of
product line profitability through reduced levels of promotional pricing and
improved purchasing and inventory management.
Selling, general and administrative expenses as a percentage of net
sales were 40.0% in fiscal 1995, 40.4% in fiscal 1994, and 40.3% in fiscal 1993.
The decline from fiscal 1994 to fiscal 1995 resulted from significantly lower
information system development expenses offset in part by higher store level
expenses directed at improving customer service. The increase from fiscal 1993
to fiscal 1994 was principally the result of higher operating costs associated
with superstores and investment spending for new information systems offset by
lower advertising expenses and cost savings from productivity improvements in
the stores.
Net interest expense was $8.4 million in fiscal 1995, $5.5 million in
fiscal 1994 and $5.5 million in fiscal 1993. The increase in fiscal 1995 was due
primarily to higher interest rates on bank borrowings, in line with the general
increase in short-term interest rates.
The Company's effective income tax rate was 38.5% in fiscal 1995
compared to 37.5% in fiscal 1994 and 1993. The change in effective tax rate
primarily resulted from an increase in the federal corporate income tax rates.
Cargo Express Stores, the Company's retail housewares division, has
been reported as a discontinued operation since fiscal 1993, when the Company
adopted a plan for its sale and recorded an after-tax provision of $1.6 million.
In the fourth quarter of fiscal 1994, the Company decided to liquidate the
division and accordingly, an after-tax provision of $5.2 million, or $0.56 per
share, was recorded for the loss on disposal and estimated operating losses to
be incurred through date of disposal. No additional provision was necessary in
fiscal 1995 to complete the liquidation of Cargo Express.
In the first quarter of fiscal 1994, the Company recorded, as a
cumulative effect of accounting change, a one-time benefit of $0.4 million, or
$0.04 per share, from the adoption of Statement of Financial Accounting
Standards (SFAS) No. 109 "Accounting for Income Taxes".
Page 3
<PAGE> 4
In fiscal 1993, an extraordinary gain of $2.1 million, net of income
tax provision of $1.2 million, resulted from the repurchase, at a discount, of
$17.8 million of the Company's 6-1/4% convertible subordinated debentures, due
March 1, 2002. This extraordinary gain increased fiscal 1993 earnings by $0.21
per share. This repurchase was accomplished with less expensive funds borrowed
under the Company's revolving credit agreement.
Earnings from continuing operations before extraordinary item and
cumulative effect of accounting change for fiscal 1995 increased 69%, or $4.8
million to $11.7 million from $6.9 million in fiscal 1994.
Management believes that inflation has not had a significant effect on
the growth of net sales or on earnings from continuing operations over the past
three years.
The Company's business exhibits seasonality which is typical for most
retail companies, with much stronger sales in the second half of the year than
the first half of the year. In general, net earnings are highest during the
months of September through December, when sales volumes provide significant
operating leverage. Conversely, net earnings are substantially lower during the
relatively low volume sales months of January through August. Working capital
requirements also fluctuate during the year and reach their highest levels
during the third and fourth fiscal quarters as the Company increases its
inventory in anticipation of its peak selling season.
LIQUIDITY AND CAPITAL RESOURCES
The acquisition of the Cloth World stores significantly impacted the
Company's balance sheet. Total assets increased $86.9 million to $427.3 million,
at January 28, 1995, compared to $340.4 million at January 29, 1994. Working
capital increased $30.7 million to $198.2 million, at fiscal year end 1995,
compared to $167.5 million at the end of the prior year. The ratio of current
assets to current liabilities declined to 2.6:1 at January 28, 1995 from 3.1:1
at January 29, 1994. Debt to capitalization ratio increased to 44.0% at fiscal
year end 1995 from 40.7% at the end of the prior year.
The Cloth World acquisition required a cash payment at closing of $62.0
million and an additional payment due upon determination of the final purchase
price. A final payment of $3.7 million was made shortly after the end of fiscal
1995. Even with the cash outlay for the acquisition, the Company ended fiscal
1995 with only a $24.5 million increase in long-term debt. In addition, an
offsetting $11.5 million was held in short-term investments. The liquidation of
approximately $20 million of incompatible Cloth World inventory as a result of
closing certain acquired stores and the Cloth World distribution facility, as
well as other operating activities contributed to the $64.3 million of cash
generated from operations in fiscal 1995, a $51.5 million increase over the
prior year.
As part of the conversion of former Cloth World stores, the product mix
will be expanded to the broader selection of merchandise available in Jo-Ann
Fabrics and Crafts stores. Merchandise inventories are expected to increase over
each of the first three quarters and are expected to be approximately $30
million higher at year end 1996 as compared to year end 1995.
Capital expenditures were $11.7 million in fiscal 1995, $8.5 million in
fiscal 1994, and $32.3 million in fiscal 1993. The change in expenditures among
the years relates directly to the number of stores opened each year. For fiscal
1996, the Company expects to open approximately 45 superstores, close 35 smaller
stores and convert 300 stores acquired from Cloth World to the Jo-Ann Fabrics
and Crafts store format. Capital expenditures are expected to be approximately
$28 million during fiscal 1996.
Page 4
<PAGE> 5
During fiscal 1995, the Company purchased 45,175 shares of its common
stock for $0.7 million, primarily in the open market. These shares will be used
to satisfy obligations under the Company's benefit plans and for other corporate
purposes. The remaining number of shares that can be acquired pursuant to prior
authorization by the Board of Directors is 997,025.
The Company has a $200.0 million revolving credit facility with a group
of eight banks that expires on September 29, 1997. The Company may borrow up to
a maximum of $220.0 million, subject to further limitations during specified
time frames, by utilizing funds available under this credit facility and other
lines of credit. As of January 28, 1995, the Company had borrowings of $70.0
million under the revolving credit facility.
The Company continues to maintain excellent vendor and banking
relationships and has sufficient resources, including unused credit facilities,
to meet its operating needs and fund its capital expenditures for fiscal 1996.
Page 5
<PAGE> 6
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Registrant are included
in Part II, Item 8:
Consolidated Balance Sheets - January 28, 1995 and January 29, 1994
Consolidated Statements of Income for the three fiscal years ended January 28,
1995
Consolidated Statements of Shareholders' Equity for the three fiscal years ended
January 28, 1995
Consolidated Statements of Cash Flows for the three fiscal years ended January
28, 1995
Notes to Consolidated Financial Statements
Report of Management
Report of Independent Public Accountants
Page 6
<PAGE> 7
CONSOLIDATED BALANCE SHEETS
FABRI-CENTERS OF AMERICA, INC.
<TABLE>
<CAPTION>
January 28, January 29,
1995 1994
- --------------------------------------------------------------------------------
(Thousands of dollars)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 21,887 $ 7,715
Merchandise inventories 290,560 224,803
Prepaid expenses and other current assets 11,963 11,009
Deferred income taxes 1,296 4,123
---------- ----------
Total current assets 325,706 247,650
Property and equipment, at cost:
Land 1,975 1,966
Buildings 20,699 20,052
Furniture and fixtures 77,982 72,088
Leasehold improvements 33,525 26,195
---------- ----------
134,181 120,301
Less accumulated depreciation and amortization 50,059 44,668
---------- ----------
84,122 75,633
Mortgage receivable 7,676 7,926
Other assets 9,800 9,164
---------- ----------
Total assets $ 427,304 $ 340,373
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 96,738 $ 62,309
Accrued expenses 28,043 11,375
Accrued income taxes 2,678 2,954
Net liabilities of discontinued operation -- 3,557
---------- ----------
Total current liabilities 127,459 80,195
Long-term debt 70,000 45,500
Convertible subordinated debentures 56,983 56,983
Deferred income taxes 9,818 8,499
Other long-term liabilities 1,325 184
Shareholders' equity:
Common stock 989 975
Additional paid-in capital 72,921 70,598
Other (2,556) (1,896)
Retained earnings 99,336 87,602
---------- ----------
170,690 157,279
Treasury stock, at cost (8,971) (8,267)
---------- ----------
Total shareholders' equity 161,719 149,012
---------- ----------
Total liabilities and shareholders' equity $ 427,304 $ 340,373
========== ==========
</TABLE>
See notes to consolidated financial statements
Page 7
<PAGE> 8
CONSOLIDATED STATEMENTS OF INCOME
FABRI-CENTERS OF AMERICA, INC.
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 29, JANUARY 30,
YEARS ENDED 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
(Thousands of dollars, except share and per share data)
<S> <C> <C> <C>
Net sales $ 677,279 $ 582,071 $ 574,120
Costs and expenses:
Cost of goods sold 378,593 329,950 329,058
Selling, general and administrative expenses 271,187 235,439 231,261
Interest expense, net 8,418 5,547 5,522
-------------- -------------- --------------
658,198 570,936 565,841
-------------- -------------- --------------
Earnings from continuing operations before income taxes,
extraordinary item and cumulative effect of accounting
change 19,081 11,135 8,279
Income taxes 7,347 4,176 3,105
-------------- -------------- --------------
Earnings from continuing operations before extraordinary item
and cumulative effect of accounting change 11,734 6,959 5,174
Discontinued operations:
Loss from operations, net of tax benefit of $860 -- -- (1,432)
Provision for loss on disposal, including estimated operating
losses to be incurred through disposal date of $691 and
$1,562 (net of tax benefits of $3,121 and $938) -- (5,201) (1,562)
-------------- -------------- --------------
-- (5,201) (2,994)
-------------- -------------- --------------
Earnings before extraordinary item and cumulative effect of
accounting change 11,734 1,758 2,180
Extraordinary item:
Gain on buyback of convertible subordinated debentures
net of tax provision of $1,231 -- -- 2,052
Cumulative effect of accounting change -- 399 --
-------------- -------------- --------------
Net earnings $ 11,734 $ 2,157 $ 4,232
============== ============== ==============
Earnings (loss) per common share:
Earnings from continuing operations $ 1.26 $ 0.75 $ 0.54
Loss from discontinued operations -- (0.56) (0.31)
-------------- -------------- --------------
Earnings before extraordinary item and cumulative effect of
accounting change 1.26 0.19 0.23
Extraordinary item -- -- 0.21
Cumulative effect of accounting change -- 0.04 --
-------------- -------------- --------------
Net earnings $ 1.26 $ 0.23 $ 0.44
============== ============== ==============
Average shares and equivalents outstanding 9,343,663 9,284,521 9,631,537
</TABLE>
See notes to consolidated financial statements
Page 8
<PAGE> 9
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FABRI-CENTERS OF AMERICA, INC.
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 29, JANUARY 30,
YEARS ENDED 1995 1994 1993
- ----------------------------------------------------------------------------------------
(Thousands of dollars)
COMMON STOCK AT STATED VALUE
<S> <C> <C> <C>
Balance at beginning of year $ 975 $ 969 $ 962
Exercise of stock options 5 13 7
Issuance of restricted stock awards 10 1 4
Cancellation of restricted stock awards (1) (8) (4)
--------- --------- ---------
Balance at end of year 989 975 969
- ----------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year 70,598 70,804 67,976
Exercise of stock options 491 1,202 519
Issuance of restricted stock awards 1,636 135 1,580
Cancellation of restricted stock awards (103) (1,747) (481)
Issuance of treasury shares -- 6 166
Tax benefit on options exercised 299 198 1,044
--------- --------- ---------
Balance at end of year 72,921 70,598 70,804
- ----------------------------------------------------------------------------------------
OTHER
Balance at beginning of year (1,896) (3,692) (3,606)
Issuance of restricted stock awards (1,646) (136) (1,584)
Cancellation of restricted stock awards 93 1,011 331
Amortization of restricted stock awards 893 921 1,167
--------- --------- ---------
Balance at end of year (2,556) (1,896) (3,692)
- ----------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance at beginning of year 87,602 85,445 81,213
Net earnings 11,734 2,157 4,232
--------- --------- ---------
Balance at end of year 99,336 87,602 85,445
- ----------------------------------------------------------------------------------------
TREASURY STOCK
Balance at beginning of year (8,267) (5,052) (4,022)
Repurchase of common stock (704) (3,308) (1,318)
Issuance of treasury shares -- 93 288
--------- --------- ---------
Balance at end of year (8,971) (8,267) (5,052)
- ----------------------------------------------------------------------------------------
Shareholders' equity $ 161,719 $ 149,012 $ 148,474
- ----------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
Page 9
<PAGE> 10
CONSOLIDATED STATEMENTS OF CASH FLOWS
FABRI-CENTERS OF AMERICA, INC.
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 29, JANUARY 30,
YEARS ENDED 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
(Thousands of dollars)
<S> <C> <C> <C>
Operating activities:
Net earnings $ 11,734 $ 2,157 $ 4,232
Additions (deductions) not requiring cash:
Extraordinary gain before income tax provision -- -- (3,283)
Cumulative effect of accounting change -- (399) --
Provision for loss on discontinued operation -- 8,322 2,500
Cancellation of restricted stock awards (11) (744) (154)
Depreciation and amortization and other noncash expenses 13,978 12,138 11,120
Deferred income taxes 4,146 184 2,943
(Gain) loss on disposal of fixed assets (70) 699 1,042
Working capital changes, net of acquisition of Cloth World:
Merchandise inventories 28,499 (1,155) (40,333)
Prepaid expenses and other current assets 2,905 350 (3,626)
Net liabilities of discontinued operation (3,557) 8,135 (5,292)
Accounts payable 3,921 (17,968) 154
Accrued expenses 3,020 (961) 813
Accrued income taxes (276) 1,983 (5,164)
----------------------------------------------
Net cash provided by (used for) operating activities 64,289 12,741 (35,048)
Investing activities:
Capital expenditures (11,740) (8,491) (32,295)
Acquisition of Cloth World, net of cash acquired (A) (61,829) -- --
Assets held for sale -- -- 9,453
Mortgage receivable 250 375 (8,301)
Other, net (1,034) 182 519
----------------------------------------------
Net cash used for investing activities (74,353) (7,934) (30,624)
Financing activities:
Proceeds from long-term debt 89,500 46,000 25,300
Repayment of long-term debt (65,000) (47,600) (18,300)
Proceeds from sale of convertible subordinated debentures, net -- -- 72,813
Repurchase of convertible subordinated debentures -- -- (14,049)
Other long-term liabilities (56) (26) (87)
Proceeds from exercise of stock options 496 1,215 526
Repurchase of common stock (704) (3,308) (1,318)
----------------------------------------------
Net cash provided by (used for) financing activities 24,236 (3,719) 64,885
Net increase (decrease) in cash 14,172 1,088 (787)
Cash and cash equivalents at beginning of year 7,715 6,627 7,414
----------------------------------------------
Cash and cash equivalents at end of year $ 21,887 $ 7,715 $ 6,627
----------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid (refunded) during the year for:
Interest $ 8,834 $ 7,584 $ 4,726
Income taxes $ 3,927 $ (3,516) $ 5,725
(A) Acquisition of Cloth World, net of cash acquired
Working capital, other than cash $ (57,154)
Property and equipment (9,540)
Other assets (42)
Payable to Brown Group Inc. 3,710
Other liabilities 1,197
--------------
Net cash used to acquire Cloth World $ (61,829)
--------------
</TABLE>
See notes to consolidated financial statements
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<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Fabri-Centers of
America, Inc., and its wholly owned subsidiaries (the "Company"). These
statements present the Company's Cargo Express Stores division as a discontinued
operation, which ceased operation in the first quarter of fiscal 1995. Except
where otherwise noted, the Notes to Consolidated Financial Statements pertain to
the Company's continuing operations. All significant intercompany accounts and
transactions have been eliminated.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid investments with a maturity of three
months or less at the time of purchase. At January 28, 1995, the Company held
cash equivalents of $11.5 million stated at cost. No cash equivalents were held
at January 29, 1994.
FINANCIAL INSTRUMENTS
The Company believes that the carrying value of cash equivalents approximates
their fair value. All other financial instruments are considered to have a fair
value which approximates carrying value at January 28, 1995, unless otherwise
specified.
The Company occasionally enters into interest rate swap and interest
rate cap agreements to hedge against interest rate risk. The interest
differentials from these swaps and caps are recorded as interest expense as
incurred.
STORE OPENING EXPENSES
Store opening expenses are charged to operations as incurred, which is generally
the same period that the store is opened.
PROPERTY AND EQUIPMENT
Depreciation of buildings, furniture and fixtures, and leasehold improvements is
provided principally by the straight-line method. The major classes of assets
and ranges of annual depreciable rates are as follows:
<TABLE>
<S> <C>
Buildings 2-1/2% - 10%
Furniture and fixtures 6-2/3% - 20%
Leasehold Improvements 6-2/3% - 20%
</TABLE>
Maintenance and repair expenditures are charged to expense as incurred and
betterments and major renewals are capitalized.
INTANGIBLE ASSETS
Other assets includes the value assigned for trade names, favorable lease
interest, and other intangible assets acquired in connection with purchased
businesses totalling $4,781,000 and $5,622,000 as of fiscal year end 1995 and
1994, respectively, and are being amortized primarily on a straight-line basis
over 3 to 20 years. Amortization expense was $841,000, $844,000, and $820,000 in
fiscal 1995, 1994, and 1993,
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<PAGE> 12
respectively. In March 1995, the Financial Accounting Standards Board issued
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," that becomes effective for fiscal years beginning
after December 15, 1995. The Company intends to adopt the provisions of this
statement in the first quarter of fiscal 1997. The adoption is not expected to
have a material effect on the Company's financial statements.
RECLASSIFICATIONS
Certain amounts in the fiscal 1994 and fiscal 1993 financial statements have
been reclassified in order to conform with the presentation for fiscal 1995.
STORE INVENTORIES
Store physical inventories are taken on a cycle basis throughout the fiscal
year. Store inventories subsequent to the physical inventory are charged at cost
for shipments of merchandise to the stores and are relieved at cost for the sale
of merchandise.
INCOME TAXES
Effective January 31, 1993, the Company adopted SFAS 109, "Accounting for Income
Taxes." Under SFAS 109, deferred taxes are determined based on estimated future
tax effects of differences between the financial statement and tax bases of
assets and liabilities giving consideration to enacted tax laws. As permitted by
SFAS 109, the Company has elected not to restate the financial statements for
any prior years.
NOTE 2 - INVENTORIES
Inventories are stated at the lower of cost or market. Approximately 99 percent
and 97 percent of inventories were valued using the last-in, first-out (LIFO)
method at January 28, 1995 and January 29, 1994, respectively. The value of
inventories stated on the LIFO method at January 28, 1995 and January 29, 1994
are not materially different from their current cost.
During fiscal 1993, reductions in inventory quantities resulted in the
liquidation of certain LIFO inventory layers. The effect of the liquidation was
to increase net earnings by approximately $320,000, or $0.03 per share in fiscal
1993. There was no material effect on net earnings from the liquidation of LIFO
inventories in fiscal 1995 or fiscal 1994.
NOTE 3 - MORTGAGE RECEIVABLE
In fiscal 1993, the Company sold its former headquarters and distribution center
to an unrelated third party for cash and a long-term promissory note due 2003.
The promissory note bears interest at a rate of 5.5 percent through April 30,
1995, 6.0 percent from May 1, 1995 through April 30, 1998, 8.0 percent from May
1, 1998 through April 30, 2001 and 9.0 percent thereafter. This note is secured
by a purchase money mortgage.
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<PAGE> 13
NOTE 4 - LEASES
Principally all of the Company's retail stores operate out of leased facilities.
All store leases are operating leases generally for periods up to ten years with
renewal options for up to twenty years. Certain leases contain escalation
clauses, and in some cases, provide for contingent rents based on a percent of
sales in excess of defined minimums. The Company in certain instances is
required to pay its prorata share of real estate taxes and common area
maintenance expenses. The Company also leases certain store fixtures generally
under five-year lease terms.
The following is a schedule of future minimum rental payments under
non-cancelable operating leases as of January 28, 1995:
<TABLE>
<CAPTION>
Minimum
Fiscal Year Rentals
- --------------------------------------------------------------------------------------------------------------------
(Thousands of dollars)
<S> <C>
1996 $ 66,007
1997 64,174
1998 62,002
1999 58,541
2000 54,691
Thereafter 132,420
-----------
$ 437,835
===========
</TABLE>
Rent expense was as follows:
<TABLE>
<CAPTION>
Fiscal Year 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
(Thousands of dollars)
<S> <C> <C> <C>
Minimum rentals $ 57,081 $ 49,425 $ 41,735
Contingent rentals 1,286 1,384 2,365
Less:
Sublease rentals (1,397) (1,375) (484)
---------- ---------- -----------
$ 56,970 $ 49,434 $ 43,616
========== ========== ===========
</TABLE>
The Company has entered into lease commitments for new stores to be
opened after January 28, 1995. The aggregate minimum rentals applicable to these
locations, which are included in the future minimum rental payments, amount to
$6,309,000.
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NOTE 5 - CAPITAL STOCK
The following table details the common stock activity for fiscal 1995 and fiscal
1994:
<TABLE>
<CAPTION>
$0.10 Common Stock
---------------------------------------------
Shares
Outstanding Shares
Net of Treasury in Treasury
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at January 31, 1993 9,277,256 415,758
Exercise of stock options 123,242 ---
Issuance of restricted stock 10,000 ---
Cancellation of restricted stock (79,750) ---
Treasury stock acquired (233,650) 233,650
--- ---- --------- -------
Balance at January 29, 1994 9,097,098 649,408
Exercise of stock options 48,988 ---
Issuance of restricted stock 104,000 ---
Cancellation of restricted stock (6,000) ---
Treasury stock acquired (45,175) 45,175
--- ---- --------- -------
Balance at January 28, 1995 9,198,911 694,583
========= =======
</TABLE>
During fiscal years 1995 and 1994, the Company acquired 45,175 and
233,650 shares, respectively, of its common stock to be held in treasury and
used for delivery upon exercise of stock options that have been or may be
granted, for the Company matching contributions to the Employees' Savings and
Profit Sharing Plan, and for other appropriate corporate purposes.
At January 28, 1995 and January 29, 1994, there were 5,000,000 shares
of serial preferred stock, without par value, authorized for issuance, none of
which are outstanding and 75,000,000 shares of common stock authorized for
issuance.
SHAREHOLDERS' RIGHTS PLAN
The Company's Shareholders' Rights Plan, adopted by the Board of Directors on
October 23, 1990 and amended March 9, 1992, issued to the shareholders one right
for each share of common stock outstanding. The rights are exercisable only if a
person or group buys, or announces a tender offer for, 20 percent or more of the
Company's common stock, or the Board of Directors declares a person or group to
be an "adverse person." When exercisable, each right will initially entitle a
holder to purchase one share of the Company's common stock for $211.50. If at
any time after the rights become exercisable, the Company is acquired in a
merger or certain other business transactions occur, each right would then
enable the holder to buy one common share of the acquiring company, or under
certain circumstances, one share of common stock of the Company, for $1.00. The
rights, which do not have voting privileges, expire in 2000, but may be redeemed
by action of the Board prior to that time, under certain circumstances, for
$0.01 per right. Until the rights become exercisable, they have no dilutive
effect on earnings per share.
Page 14
<PAGE> 15
NOTE 6 - CONVERTIBLE SUBORDINATED DEBENTURES
In March 1992, the Company issued $74,750,000 of 6-1/4 percent convertible
subordinated debentures due March 1, 2002. Interest is payable semi-annually on
March 1 and September 1. The debentures are convertible by a holder into shares
of the Company's common stock at a conversion price of $48-3/4 per share. These
debentures are subject to redemption, at the option of the Company, in whole or
in part, at a redemption price of 104.5 percent of the principal amount, which
decreases in equal increments annually through March 1, 1999, and remains at 100
percent thereafter. The Company had incurred approximately $1.9 million in debt
issuance costs which were deferred and are being amortized over the ten-year
term of the debentures. At January 28, 1995, the fair value of these debentures
was $43,877,000 based upon quoted market price for the same issue.
During fiscal 1993, the Company repurchased, at a discount, $17,767,000
of the debentures resulting in an after-tax gain of $2,052,000 or $0.21 per
share, which includes the write-off of unamortized issuance costs of $435,000.
NOTE 7 - RESTRICTED STOCK AWARDS
During fiscal 1995, the shareholders approved the 1994 Executive Incentive Plan
that succeeds the Executive Incentive Plan that expired January 29, 1994. Under
these plans, 650,250 shares of common stock have been reserved that may be
awarded to executive officers and senior management personnel. For the fiscal
year ended January 28, 1995, 248,250 restricted shares were outstanding under
the plans. The vesting periods for these restricted shares are generally five
years with all rights to such restricted stock terminating without any payment
of consideration by the Company unless the grantee remains in the continuous
employment of the Company throughout the vesting period. Unearned compensation
resulting from the issuance of shares under this plan is being amortized over
the vesting periods and the unamortized portion has been reflected as a
reduction of shareholders' equity. At January 28, 1995, 402,000 shares of common
stock are available for future awards under the 1994 Executive Incentive Plan.
NOTE 8 - STOCK OPTION PLAN
Nonqualified and incentive stock options have been granted to certain officers
and key employees under the Company's 1990 Employee Stock Option and Stock
Appreciation Rights Plan ( the "Plan") at prices not less than fair market value
of the common stock at the date of grant. The Plan also permits the granting of
stock appreciation rights, with respect to all or part of the common stock
subject to any option granted under this plan. The options and stock
appreciation rights become exercisable to the extent of one-fourth of the
optioned shares for each full year of employment following the date of grant and
generally expire ten years after the date of the grant. During fiscal 1995, the
Company's shareholders approved an amendment to the Plan which increased by
750,000 the number of shares with respect to which options may be granted and
limited at 100,000 shares the number of nonqualified options, stock appreciation
rights and incentive stock options which may be granted to any one individual in
any single year.
Page 15
<PAGE> 16
The following is a summary of stock option and stock appreciation
rights ("SAR") activity:
<TABLE>
<CAPTION>
Shares Option Price
---------------------------------------
Options SAR Per Share
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at February 2, 1992 774,617 --- $ 4.75 - $ 46.13
Granted 707,800 --- 10.63 - 41.44
Exercised (36,861) --- 4.75 - 30.44
Cancelled (126,088) --- 8.42 - 42.01
--------- ---------
Outstanding at January 30, 1993 1,319,468 --- 4.75 - 46.13
Granted 255,500 --- 13.31 - 17.44
Exercised (123,242) --- 4.75 - 15.83
Cancelled (207,872) --- 8.83 - 46.00
--------- ---------
Outstanding at January 29, 1994 1,243,854 --- 4.75 - 46.13
Granted 328,800 --- 12.69 - 17.44
Exercised (48,988) --- 4.75 - 17.25
Cancelled (96,239) --- 5.00 - 46.00
--------- ---------
Outstanding at January 28, 1995 1,427,427 --- 4.75 - 46.13
========= =========
Exercisable 661,027 --- 4.75 - 46.13
Reserved for future option and
SAR grants 695,448 695,448
</TABLE>
In addition, under the 1988 Stock Option Plan for Non-Employee
Directors, the Company may grant stock options for up to 150,000 shares of
Company common stock at prices not less than the fair market value of the common
stock at the date of grant. The options become exercisable to the extent of
one-fourth of the optioned shares for each full year of continuous service
after the date of grant and generally expire ten years after the date of t he
grant. During fiscal 1995, 20,000 stock options were granted at $14.88 per share
and no stock options were exercised. During fiscal 1993, 15,000 stock options
were granted at $34.06 per share and 30,000 were exercised at $5.05. No stock
options were granted or exercised during fiscal 1994. At January 28, 1995,
75,000 stock options remain outstanding, of which 43,750 are currently
exercisable and 40,000 options are reserved for future grants.
NOTE 9 - EMPLOYEES' SAVINGS AND PROFIT SHARING PLAN AND POSTRETIREMENT BENEFITS
The Company sponsors a tax-deferred savings plan whereby eligible employees may
elect quarterly to contribute up to the lesser of 10 percent of annual
compensation or the statutory maximum. The Company makes a 50 percent matching
contribution in the form of Company common stock, up to a maximum employee
contribution of 4 percent of the employee's compensation. Employer contributions
of Company common stock have been made through the issuance of shares out of the
treasury or by purchasing shares on the open market. The amount of the Company's
matching contribution in fiscal year 1995, 1994, and 1993 was approximately
$600,000, $516,000 and $536,000, respectively. Plan assets included 255,781 and
214,162 shares of the Company's common stock at January 28, 1995, and January
29, 1994, respectively.
Page 16
<PAGE> 17
The Company does not provide postretirement health care benefits.
Therefore, Statement of Financial Accounting Standards (SFAS) 106, "Employer's
Accounting for Postretirement Benefits Other Than Pensions," has no impact on
the Company's financial position or results of operations.
NOTE 10 - LONG-TERM DEBT
On September 30, 1994, the Company entered into a $200 million three-year
revolving credit agreement (the Credit Facility) with a group of eight banks
(the Bank Group). The Company pays a facility fee on the revolving credit
commitment amount and pays a commitment fee on the unused portion of the Credit
Facility each of which range from .125 percent to .25 percent based on the
achievement of specified ranges of certain financial covenants. Interest on
borrowings under the Credit Facility is payable at an applicable margin over
prime, federal funds or LIBOR rates. The applicable margin ranges between .5
percent and 2.5 percent, based on the achievement of specified ranges of certain
financial covenants.
The Credit Facility contains certain financial covenants which limit
the Company's capital expenditures and defined leverage ratio, as well as,
require the Company to maintain a minimum defined current ratio, working
capital, tangible net worth, fixed charge coverage ratio and current funded
indebtedness ratio. The maximum allowable combined outstanding debt for the
Credit Facility and additional bank borrowings is $220 million, subject to
limitations of revolving credit borrowings during specified time frames
throughout the commitment period. The fair value of the Credit Facility
approximates its carrying value as a result of its interest rate being variable
and based on current market rates.
The Company has an interest rate cap agreement with one of the banks
in the Bank Group. The interest rate cap establishes a maximum interest rate
payable when the variable rate exceeds a certain rate. At January 28, 1995 the
total notional amount under the interest rate cap was $20 million, having a
capped LIBOR rate of 8 percent, terminating October 7, 1996. The Company has an
interest rate swap agreement under which it pays to the counter-party interest
at a fixed rate of 7.3 percent and the counter-party pays to the Company at a
variable rate based on LIBOR, on a current notional amount of $10 million,
terminating October 4, 1996. The estimated fair values, at January 28, 1995, of
the interest rate cap and swap agreements, based on the present value of
expected future cash flows, were immaterial.
During 1995, the Company's weighted average interest rate and
weighted average borrowings under the current and former revolving credit
facility were 5.56 percent and $65.6 million, respectively, versus 4.00 percent
and $68.0 million during fiscal 1994 and 4.06 percent and $33.6 million during
fiscal 1993.
Page 17
<PAGE> 18
NOTE 11 - INCOME TAXES
Effective January 31, 1993, the Company adopted SFAS 109, "Accounting for Income
Taxes." The cumulative effect of the accounting change increased net earnings
for fiscal 1994 by $399,000 or $0.04 per share.
The significant components of income tax expense are as follows:
<TABLE>
<CAPTION>
Fiscal Year 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
(Thousands of dollars)
<S> <C> <C> <C>
Current:
Federal $ 2,763 $ 3,029 $ 112
State and local 438 442 433
----------- ----------- ----------
3,201 3,471 545
Deferred 4,146 705 2,560
----------- ----------- ----------
Total income tax expense $ 7,347 $ 4,176 $ 3,105
=========== =========== ===========
</TABLE>
The reconciliation of income tax at the statutory rate to total income
tax expense is as follows:
<TABLE>
<CAPTION>
Fiscal Year 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
(Thousands of dollars)
<S> <C> <C> <C>
Federal income tax at the
statutory rate $ 6,678 $ 3,786 $ 2,815
Effect of:
State and local taxes 285 292 286
Other, net 384 98 4
---------- ---------- ----------
Provision for income taxes $ 7,347 $ 4,176 $ 3,105
========== ========== ==========
</TABLE>
Page 18
<PAGE> 19
The significant components of the Company's deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
Asset/(Liability)
------------------------
Fiscal Year 1995 1994
- ----------------------------------------------------------------------------------
(Thousands of dollars)
<S> <C> <C>
Current
Deferred tax assets:
Inventory items $ 893 $ --
Benefit programs 795 1,202
Reserve for discontinued operations 455 3,309
Other 96 151
-------- --------
2,239 4,662
Deferred tax liabilities:
Basis difference in net assets acquired (631) --
Real estate taxes (65) (195)
Personal property taxes (126) (271)
Other taxes (121) (73)
-------- --------
(943) (539)
-------- --------
Net current deferred taxes $ 1,296 $ 4,123
======== ========
Non-current
Deferred tax assets:
Unearned compensation 982 $ 809
Other 178 180
-------- --------
1,160 989
Deferred tax liabilities:
Depreciation (10,307) (9,455)
Basis difference in net assets acquired (638) --
Other (33) (33)
-------- --------
(10,978) (9,488)
-------- --------
Net non-current deferred taxes $ (9,818) $ (8,499)
======== ========
</TABLE>
The Company did not record any valuation allowances against deferred tax assets
as of January 28, 1995 and January 29, 1994.
NOTE 12 - EARNINGS PER SHARE
Earnings per share are computed by dividing net earnings by the weighted average
number of shares and share equivalents outstanding during each period. Share
equivalents represent the incremental effect from the assumed exercise of
dilutive stock options using the treasury stock method.
Page 19
<PAGE> 20
The following table presents information necessary to calculate primary
earnings per share for the periods presented.
<TABLE>
<CAPTION>
Fiscal Year 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares outstanding:
Weighted average shares
outstanding 9,156,526 9,079,127 9,328,225
Share equivalents 187,137 205,394 303,312
--------- --------- ---------
Primary shares outstanding 9,343,663 9,284,521 9,631,537
========= ========= =========
</TABLE>
The computation of fully diluted earnings per share assumes both the
exercise of dilutive stock options as well as the conversion of the Company's
6-1/4% convertible subordinated debentures. For the fiscal years 1995, 1994 and
1993, fully diluted earnings per share are the same as primary earnings per
share due to the computation producing an anti-dilutive result.
NOTE 13 - CLOTH WORLD ACQUISITION
On October 2, 1994, the Company acquired substantially all of the assets of
Cloth World, a division of Brown Group Inc. ("Cloth World") for approximately
$97 million in cash and assumed liabilities. The funds used to acquire Cloth
World were provided by internally generated funds and borrowings under a credit
facility. The acquisition has been recorded using the purchase method, and
accordingly, the results of operations of Cloth World have been included in the
Company's consolidated financial statements since the date of acquisition. The
purchase price allocation has been based on preliminary estimates. Certain
estimates, primarily for costs related to closing certain acquired stores and
settling related lease obligations, may be revised based on information that
will be obtained during fiscal 1996. However, the effect of any revisions on the
results of operations for fiscal 1995 would not be material.
Cloth World, with fiscal 1994 sales of $224 million, operated 342
specialty fabric stores in 26 states with a concentration in the southern half
of the United States.
Page 20
<PAGE> 21
Summarized below are the unaudited consolidated results of operations
of the Company, including Cloth World on a pro forma basis, as if Cloth World
had been acquired as of the beginning of the periods presented:
<TABLE>
<CAPTION>
Fiscal Year 1995 1994
- ------------------------------------------------------------------------
(Thousands of dollars, except per share data)
<S> <C> <C>
Net sales $817,695 $806,137
Earnings from continuing operations before
cumulative effect of accounting change $ 11,466 $ 7,706
Net earnings $ 11,466 $ 2,904
Earnings per common share:
Earnings from continuing operations before
cumulative effect of accounting change $ 1.23 $ 0.83
Net earnings $ 1.23 $ 0.31
</TABLE>
The pro forma financial information above is presented for informational
purposes only and is not necessarily indicative of the operating results that
would have occurred had the Cloth World acquisition been consummated at the
beginning of the periods presented. In addition, they are not intended to be a
projection of future results and do not reflect synergies that might be achieved
from combined operations.
NOTE 14 - DISCONTINUED OPERATION
In December 1993, the Company adopted a plan to liquidate its retail housewares
division, Cargo Express Stores ("Cargo Express"), which has been reported as a
discontinued operation since fiscal 1993, when the Company adopted a plan for
its sale. The net loss related to Cargo Express in fiscal 1993 was $2,994,000,
net of tax benefit, or $0.31 per share, representing operating losses and
additional costs to be incurred through the disposal date. In the fourth quarter
of fiscal 1994, the Company decided to liquidate the division and accordingly an
after-tax provision of $5,201,000, or $0.56 per share, was recorded primarily
for the write-off of fixed assets and estimated costs to complete the
liquidation, including estimated operating losses to be incurred through the
disposal date of $691,000, or $0.07 per share. During the first quarter of
fiscal 1995, the Company completed the liquidation of Cargo Express which did
not require the recognition of any additional gain or loss.
Net sales for Cargo Express were $5,381,000, $51,334,000, and
$39,690,000 for fiscal years 1995, 1994, and 1993, respectively. Assets and
liabilities of the division have been classified on the balance sheets as net
liabilities of discontinued operation. These net liabilities consisted
primarily of inventory, fixed assets, operating liabilities, and accrued losses
to be incurred for the write-off of fixed assets and estimated costs to complete
the liquidation. Interest had been allocated to Cargo Express based on a
calculation considering the Company's cost of capital and the average working
capital and net fixed assets of Cargo Express.
Page 21
<PAGE> 22
NOTE 15 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth
Fiscal 1995 Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------------------
(Thousands of dollars, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 132,676 $ 112,851 $ 175,434 $ 256,318
Gross profit $ 56,252 $ 48,883 $ 79,690 $ 113,861
Net earnings (loss) $ (1,256) $ (5,199) $ 4,075 $ 14,114
Primary earnings (loss) per common share (c) $ (0.13) $ (0.56) $ 0.44 $ 1.50
Fully diluted earnings (loss) per common share (c) $ (0.13) $ (0.56) $ 0.44 $ 1.38
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth
Fiscal 1994 Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------------------
(Thousands of dollars, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 139,751 $ 113,151 $ 147,104 $ 182,065
Gross profit $ 55,951 $ 48,274 $ 66,329 $ 81,567
Earnings (loss) from continuing operations before
cumulative effect of accounting change $ (1,684) $ (5,433) $ 3,536 $ 10,540
Loss from discontinued operation, net of taxes (a) -- -- -- (5,201)
--------- --------- --------- ---------
Earnings (loss) before cumulative effect of
accounting change (1,684) (5,433) 3,536 5,339
Cumulative effect of accounting change (b) 399 -- -- --
--------- --------- --------- ---------
Net earnings (loss) $ (1,285) $ (5,433) $ 3,536 $ 5,339
========= ========== ========= =========
Earnings (loss) per common share: (c) (d)
Earnings (loss) from continuing operations before
cumulative effect of accounting change $ (0.18) $ (0.59) $ 0.38 $ 1.13
Loss from discontinued operation -- -- -- (0.56)
--------- --------- --------- ---------
Earnings (loss) before cumulative effect of
accounting change (0.18) (0.59) 0.38 0.57
Cumulative effect of accounting change 0.04 -- -- --
--------- --------- --------- ---------
Net earnings (loss) $ (0.14) $ (0.59) $ 0.38 $ 0.57
========= ========= ========= =========
</TABLE>
(a) Represents the after-tax provision for loss on disposal of $4,510 ($0.49
per share) and estimated after-tax operating losses to be incurred through
the disposal date of $691 ($0.07 per share). See Note 14.
(b) Represents the cumulative effect of the adoption of SFAS 109 "Accounting
for Income Taxes". See Note 11.
(c) Primary and fully diluted earnings per common share calculations for each
quarter are based on the weighted average number of shares and share
equivalents outstanding during each respective quarter. Thus, the sum of
quarterly earnings per share amounts may not necessarily be equal to the
full-year earnings per common share. See Note 12.
(d) Fully diluted earnings per share are the same as primary earnings per share
for each quarter of fiscal 1994 due to the computations of fully diluted
earnings per share producing anti-dilutive results. See Note 12.
Page 22
<PAGE> 23
REPORT OF MANAGEMENT
TO THE SHAREHOLDERS OF FABRI-CENTERS OF AMERICA, INC.
We have prepared the accompanying consolidated financial statements and related
information included herein for the years ended January 28, 1995, January 29,
1994 and January 30, 1993. The opinion of Arthur Andersen LLP, the Company's
independent public accountants, on those financial statements is included. The
primary responsibility for the integrity of the financial information included
in this annual report rests with management. This information is prepared in
accordance with generally accepted accounting principles, based on our best
estimates and judgements and giving due consideration to materiality.
The Company maintains accounting and control systems which are designed to
provide reasonable assurance that assets are safeguarded from loss or
unauthorized use, and which produce records adequate for preparation of
financial information. There are limits inherent in all systems of internal
control based on the recognition that the cost of such systems should not exceed
the benefits to be derived. We believe our system provides this appropriate
balance.
The Board of Directors pursues its responsibility for these financial
statements through the Audit Committee, composed exclusively of outside
directors. The committee meets periodically with management, internal auditors
and our independent public accountants to discuss the adequacy of financial
controls, the quality of financial reporting, and the nature, extent and results
of the audit effort. Both the internal auditors and independent public
accountants have private and confidential access to the Audit Committee at all
times.
Alan Rosskamm Robert Norton
Chairman of the Board, Vice Chairman of the Board
President and Chief Executive Officer and Chief Financial Officer
Page 23
<PAGE> 24
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF FABRI-CENTERS OF AMERICA, INC.
We have audited the accompanying consolidated balance sheets of Fabri-Centers of
America, Inc. (an Ohio corporation) and subsidiaries as of January 28, 1995, and
January 29, 1994, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three fiscal years in the
period ended January 28, 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on 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 financial position of Fabri-Centers of America,
Inc. and subsidiaries as of January 28, 1995, and January 29, 1994, and the
result of their operations and their cash flows for each of the three fiscal
years in the period ended January 28, 1995 in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Cleveland, Ohio,
March 1, 1995.
Page 24
<PAGE> 25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information regarding the
members of the Board of Directors of the Company, based upon information
furnished to the Company by such persons, except as otherwise noted, as of March
31, 1995. Certain information regarding the executive officers of the Company
is included in Part I of the Annual Report on Form 10-K pursuant to Instruction
3 to Item 401(b) of Regulation S-K.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION PAST FIVE YEARS, DIRECTOR
NAME OTHER DIRECTORSHIPS AND AGE SINCE
---- ------------------------------------- --------
<S> <C> <C>
Robert Norton Vice Chairman since March 1993 and Chief 1989
Financial Officer for more than five years;
Executive Vice President from September 1988
to March 1993; Chief Administrative Officer
from May 1990 to March 1993; age 48.
Alma Zimmerman Senior Vice President of the Company 1967
for more than five years; age 82.
Ira Gumberg President of J.J. Gumberg Co. (real estate 1992
management and development) for more than five
years; Director of Mellon Bank, N.A.; age 41.
Samuel Krasney Managing Partner, ABBA Capital Enterprises 1976
since September 1993; Chairman of the
Board, President and Chief Executive
Officer, Banner Aerospace, Inc. from June 1990
to September 1993 and prior thereto, Vice
Chairman of the Board, The Fairchild
Corporation (formerly Banner Industries,
Inc.) for more than five years;
Director of Banner Aerospace, Inc.,
and Waxman Industries, Inc.; age 70.
Frank Newman President, Chief Operating Officer and 1991
Director of Eckerd Corporation (retail
pharmacy stores) since July 1993;
President and Chief Executive Officer, F & M
Distributors prior to July 1993 for more
than five years; age 46.
Betty Rosskamm Secretary of the Company for more than five years 1967
and, since December 1991, Senior Vice President;
prior to December 1991, Treasurer of the Company
for more than five years; age 66.
</TABLE>
Page 25
<PAGE> 26
<TABLE>
<S> <C> <C>
Alan Rosskamm Chief Executive Officer of the Company for more 1985
than five years, since April 1993, President,
and since July 1992, Chairman of the Board;
prior to July 1992, President of the Company
for more than five years; Director of Charming
Shoppes Inc. (women's apparel retailer); age 45.
Scott Cowen Dean of the Weatherhead School of Management 1987
and Professor of Accounting, Case Western
Reserve University, for more than five years;
Director of American Greetings Corporation,
Forest City Enterprises, Inc., LDI Corporation,
Premier Industrial Corporation and Society
National Bank; age 48.
</TABLE>
Betty Rosskamm is the mother of Alan Rosskamm.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3 and 4 and amendment thereto
furnished to the Company with respect to its most recent fiscal year, and
written representations from reporting persons that (other than described below)
no Form 5 was required, the Company believes that, during the fiscal year ended
January 28, 1995, all filing requirements applicable to its executive officers
and Directors were met, except that Messrs. Krasney and Cowen each inadvertently
filed a late Form 5 with respect to such fiscal year relating to an automatic
grant of stock options under the Directors Plan (as defined below).
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth information relating to the annual and
long-term compensation for the fiscal years ended January 28, 1995, January 29,
1994 and January 30, 1993, for the Chief Executive Officer and the other four
most highly compensated executive officers of the Company:
Page 26
<PAGE> 27
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------------- ------
SECURITIES
OTHER UNDERLYING ALL
ANNUAL OPTIONS/ OTHER
COMPEN- RESTRICTED SARS COMPEN-
NAME AND FISCAL SATION STOCK (E) SATION
PRINCIPAL POSITION YEAR SALARY (A) BONUS (B) (C) AWARD(S)(D) (SHARES) (F)
- ------------------- ------ ---------- --------- ---------- ----------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Alan Rosskamm 1995 $352,884 $264,663 - $196,875 15,000 $79,144
Chairman of the Board, 1994 $341,346 $103,683 - $0 15,000 $18,177
President and Chief 1993 $302,375 $0 - $450,750 50,000 $18,044
Executive Officer
Robert Norton 1995 $321,031 $233,273 - $157,500 12,000 $16,162
Vice Chairman of 1994 $301,090 $91,485 - $0 12,000 $19,145
the Board and Chief 1993 $266,208 $0 - $450,750 40,000 $19,012
Financial Officer
Jane Aggers 1995 $246,712 $185,034 - $236,250 12,000 $19,194
Executive Vice 1994 $217,468 $61,860 - $136,250 32,000 $10,111
President- 1993 $162,171 $12,000 - $187,813 20,000 $4,364
Merchandising and
Marketing
Fred Johnson 1995 $172,404 $83,616 - $63,000 5,000 $2,342
Senior Vice President 1994 $159,231 $30,660 - $0 10,000 $3,428
Management Information 1993 $141,000 $12,000 - $75,125 12,500 $3,774
Systems
John Stec 1995 $170,000 $94,150 - $63,000 5,000 $1,808
Senior Vice President- 1994 $171,090 $32,459 - $0 5,000 $3,444
Real Estate 1993 $162,250 $12,000 - $0 10,000 $4,364
</TABLE>
---------------
(A) Includes amounts earned but deferred pursuant to Section 401(k)
of the Internal Revenue Code.
(B) Incentive Bonus Compensation is based on individual percentages
established by the Compensation Committee and is based on
achievement of pre-established performance goals. Amounts
represent bonuses earned in the current fiscal year for which
payment is not made until the subsequent fiscal year.
(C) Excludes perquisites and other benefits, unless the aggregate
amount of such compensation is greater than the lesser of
$50,000 or 10 percent of the total of annual salary and bonus
reported for the named executive officer.
(D) Restricted stock consists of Common Shares issued and delivered
to the recipient at the time the award is made without payment
to the Company, but which are subject to restrictions on
transfer
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<PAGE> 28
for, and forfeiture in the event of termination of employment
prior to the expiration of, a specified period of time
(generally at the end of a period of five years). The amounts
reported in the table represent the market value at the date of
grant. In fiscal years 1995, 1994, and 1993, the executive
officers listed in the compensation table received the
following numbers of restricted shares, respectively: Alan
Rosskamm - 12,500, 0, 12,000; Robert Norton - 10,000, 0,
12,000; Jane Aggers - 15,000, 10,000, 5,000; Fred Johnson -
4,000, 0, 2,000; John Stec - 4,000, 0, 0. The aggregate number
and value of the restricted stock holdings at January 28, 1995
were for Mr. Rosskamm 69,500 Common Shares and $1,112,000, Mr.
Norton 59,500 Common Shares and $952,000, Ms. Aggers 36,000
Common Shares and $576,000, Mr. Johnson 7,500 Common Shares and
$120,000, and Mr. Stec 10,000 Common Shares and $160,000,
without giving effect to the diminution of value attributable
to the restrictions on such shares. Currently, the Company does
not pay cash dividends on its Common Shares; however, from time
to time the Board of Directors may re-examine the issue of
dividend payments. The Common Shares of restricted stock would
participate the same as other Common Shares of the Company
regarding dividend payment.
(E) The Company's 1990 Employees Stock Option and Stock
Appreciation Rights Plan, as amended, provides for the award of
incentive and non-qualified stock options and stock
appreciation rights to key employees of the Company.
(F) Reflects matching contributions, equal to 50% of a
participant's first 4% under the Company's Employees' Savings
and Profit Sharing Plan and amounts accrued by the Company for
potential benefits earned under the Company's 1979 Supplemental
Retirement Benefit Plan (the "1979 Plan"). The 1979 Plan
provides benefits, subject to forfeiture, to such employees
upon normal retirement, early retirement or total disability.
In fiscal years 1995, 1994 and 1993, the Company had accrued,
under the 1979 Plan, for the executive officers listed in the
compensation table, the following amounts, respectively: Alan
Rosskamm - $0, $13,680, $13,680; Robert Norton - $14,648,
$14,648, $14,648; Jane Aggers - $17,448, $5,816, $0; Fred
Johnson - $0, $0, $0; John Stec - $0, $0, $0. Mr. Rosskamm's
participation under the 1979 Plan has been terminated and has
been replaced with a Split Dollar Life Insurance arrangement
with a trust established by Alan Rosskamm, pursuant to which
the Company and that trust will share in the premium costs of
whole life insurance policies that pay death benefits of not
less than $10 million upon the death of Alan or Barbara
Rosskamm (whichever occurs later). The split-dollar insurance
arrangement is structured such that all premium payments are
returned to the Company. The present value of Mr. Rosskamm's
insurance arrangement for fiscal year 1995 is $77,427.
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<PAGE> 29
OPTION GRANTS TABLE
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information relating to stock option
grants during the last fiscal year for the Chief Executive Officer and the
other four most highly compensated executives of the Company.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES
OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(4)
- -------------------------------------------------------------- ------------------
NUMBER OF
SECURITIES PERCENT
UNDERLYING OF TOTAL EXERCISE
OPTIONS OPTIONS OR BASE
GRANTED GRANTED TO PRICE PER
(SHARES) EMPLOYEES IN COMMON EXPIRATION
NAME (1) FISCAL YEAR SHARE DATE (3) 5% 10%
---- ---------- ------------ --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Alan Rosskamm 15,000(2) 4.3% $15.50 12/15/2004 $146,218 $370,545
Robert Norton 12,000(2) 3.4% $15.50 12/15/2004 $116,974 $296,436
Jane Aggers 12,000(2) 3.4% $15.50 12/15/2004 $116,974 $296,436
Fred Johnson 5,000(2) 1.4% $15.50 12/15/2004 $ 48,739 $123,515
John Stec 5,000(2) 1.4% $15.50 12/15/2004 $ 48,739 $123,515
</TABLE>
--------------
(1) The option holder has the right to pay the exercise price by
delivering previously acquired shares of the Company's common
stock and to have shares withheld to satisfy tax withholding
requirements in connection with the exercise of options. Such
options become immediately exercisable upon a Change in Control
of the Company, as defined in the option plan. Options are
nontransferable other than by will or the laws of descent and
distribution.
(2) Options become exercisable in four equal annual installments
commencing December 16, 1995.
(3) Options were granted for a term of ten years, subject to
earlier termination in certain events related to termination of
employment.
(4) The amounts under the columns labeled "5%" and "10%" are
included by the Company pursuant to certain rules promulgated
by the Securities and Exchange Commission and are not intended
to forecast future appreciation, if any, in the price of the
Company's stock. Such amounts are based on the assumption that
the named persons hold the options granted for their full ten
year term and that the market value of the shares appreciate,
in value from the market value on the date of grant at the 5%
and 10% annualized rates.
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<PAGE> 30
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information relating to aggregate option
exercises during the last fiscal year and fiscal year-end option values for the
Chief Executive Officer and the other four most highly compensated executives of
the Company.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE MONEY
OPTIONS AT OPTIONS AT
COMMON JANUARY 28, 1995 JANUARY 28, 1995
SHARES ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan Rosskamm 5,250 $ 43,942 129,250 54,250 $922,283 $149,750
Robert Norton 0 $ 0 31,750 43,500 $ 89,716 $119,800
Jane Aggers 0 $ 0 48,750 47,250 $251,580 $100,075
Fred Johnson 0 $ 0 22,625 19,375 $107,074 $ 33,450
John Stec 0 $ 0 18,625 14,750 $ 70,699 $ 33,450
</TABLE>
CHANGE OF CONTROL AND EMPLOYMENT AGREEMENTS
The Company has entered into separate agreements (collectively, the
"Agreements") with Alan Rosskamm, Robert Norton and Jane Aggers. The Agreements
are designed to retain the executives and provide for continuity of management
in the event of any actual or threatened change in the control of the Company.
Each agreement only becomes operative upon a "Change in Control" of the Company
(as defined in the Agreements) and only if the executive is then in the employ
of the Company. After a Change in Control, each Agreement becomes, in effect, a
two-year employment agreement, providing a salary, bonus and other employee
benefits at not less than the levels existing prior to the Change in Control. If
the executive is terminated by the Company without "cause" as defined in the
Agreement or terminates his or her employment following a significant change in
his or her duties, the employee will be entitled to receive compensation and
benefits for the balance of the two-year period. The executive is obligated to
endeavor to mitigate damages by seeking comparable employment elsewhere and, to
the extent the employee receives compensation and benefits from another
employer, the foregoing payments and benefits provided by the Company will be
reduced accordingly. In each Agreement, the executive agrees that the employee
will forfeit the foregoing payments and benefits if the employee engages in
competition with the Company during the period that any payments are made or
benefits provided under the Agreement.
In connection with the Company's recent acquisition of Cloth World,
the Company and Robert Norton entered into an employment agreement wherein Mr.
Norton agreed to continue to serve in his current capacities with the Company,
as well as assist in the integration of Cloth World, through August 31, 1997,
unless terminated earlier by the parties. Under the agreement, Mr. Norton is
entitled to a minimum base salary plus participation in the bonus plan and to
receive certain severance payments if he is terminated without cause or he
terminates his employment with the Company effective on or after July 31,
1996. In addition, Mr. Norton has agreed not to engage in certain competitive
activities during the course of his employment and for a period of three years
thereafter. In the event of a "Change in Control"
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<PAGE> 31
(as defined above) during the term of the agreement, Mr. Norton may only assert
his rights under either the employment agreement or the "Change in Control"
agreement described above.
DIRECTORS' COMPENSATION
The Company compensates Directors, other than officers who are
Directors, for their services on the basis of a $16,000 annual retainer and
$1,000 for each day of Board and committee meetings attended. Effective November
17, 1994, the annual retainer was increased from its prior level of $10,000. The
Company also maintains the 1988 Stock Option Plan for Non-Employee Directors
(the "Directors Plan"), which provides automatic one-time grants of options for
15,000 Common Shares to new Non-Employee Directors as of the date of their
initial election and automatic grants of options for 10,000 Common Shares to
each Non-Employee Director upon completion of five continuous years of service
(commencing in 1989) as a Director. A total of 115,000 Common Shares are
currently available for issuance upon the exercise of options granted or which
may be granted under the Directors Plan. Each option will terminate on the date
that is ten years following the date of grant; provided, that, in the event of
the retirement of a Director after more than ten years of continuous service,
the Compensation Committee may accelerate the date on which any option
(outstanding for a period of more than twelve months) becomes exercisable. When
an optionee ceases to be a Director of the Company for any reason, that optionee
shall continue to have the right to exercise an outstanding option during the
three-month period immediately following the date of termination of such
service.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 31, 1995, the amount of
the Company's Common Shares beneficially owned by each of its Directors and
nominees for Directors, the Chief Executive Officer, the four other most highly
compensated executive officers, and all executive officers and Directors of the
Company as a group. Unless otherwise indicated, each of the persons listed in
the following table has sole voting and investment power with respect to the
Common Shares set forth opposite his or her name:
<TABLE>
<CAPTION>
NUMBER OF
NAME OF COMMON SHARES PERCENT OF CLASS
BENEFICIAL OWNER BENEFICIALLY OWNED IF 1% OR MORE
---------------- ------------------ ----------------
<S> <C> <C>
Betty Rosskamm 694,479(1)(2) 7.57%
Alan Rosskamm 590,222(1)(3) 6.34%(3)
Alma Zimmerman 547,833(1) 5.97%
Robert Norton 120,034(1)(4) 1.30%(4)
Jane Aggers 104,048(1)(5) 1.13%(5)
Fred Johnson 38,805(1)(6) --
</TABLE>
Page 31
<PAGE> 32
<TABLE>
<S> <C> <C>
John Stec 37,899(1)(7) --
Samuel Krasney 17,250(8) --
Ira Gumberg 17,250(9) --
Scott Cowen 12,300(10) --
Frank Newman 11,250(9) --
All executive officers
and Directors as a 2,191,370(1)(11) 23.10%(11)
group (11 persons)
</TABLE>
- ---------------
(1) With respect to Common Shares beneficially owned by such persons under
the Company's Employees' Savings and Profit Sharing Plan, the Common
Shares included are as of December 31, 1994, the latest date for which
statements are available.
(2) Includes 19,203 Common Shares held by Mrs. Rosskamm as custodian for
the benefit of her grandchildren.
(3) Includes 129,250 Common Shares subject to stock options granted to Mr.
Rosskamm exercisable on or prior to May 30, 1995, 69,500 Common Shares
held as restricted stock under the Company's Executive Incentive Plan,
and an aggregate of 181,751 Common Shares held by his children,
spouse, or by Mr. Rosskamm as trustee for the benefit of family
members and charities.
(4) Includes 31,750 Common Shares subject to stock options granted to Mr.
Norton exercisable on or prior to May 30, 1995, 59,500 Common Shares
held as restricted stock under the Company's Executive Incentive Plan,
and an aggregate of 2,250 Common Shares owned by Mr. Norton in a
fiduciary capacity for the benefit of his children and his spouse.
(5) Includes 56,250 Common Shares subject to stock options granted to Ms.
Aggers exercisable on or prior to May 30, 1995 and 36,000 Common
Shares held as restricted stock under the Company's Executive
Incentive Plan.
(6) Includes 23,250 Common Shares subject to stock options granted to Mr.
Johnson exercisable on or prior to May 30, 1995, 7,500 Common Shares
held as restricted stock under the Company's Executive Incentive Plan,
and an aggregate of 1,000 Common Shares owned by Mr. Johnson in a
fiduciary capacity for the benefit of his children.
(7) Includes 18,625 Common Shares subject to stock options granted to Mr.
Stec exercisable on or prior to May 30, 1995 and 10,000 Common Shares
held as restricted stock under the Company's Executive Incentive Plan.
(8) Includes 15,000 Common Shares subject to stock options granted to Mr.
Krasney under the 1988 Stock Option Plan for Non-Employee Directors
exercisable on or prior to May 30, 1995.
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<PAGE> 33
(9) Includes 11,250 Common Shares subject to stock options granted to Mr.
Gumberg and Mr. Newman under the 1988 Stock Option Plan for
Non-Employee Directors exercisable on or prior to May 30, 1995.
(10) Includes 10,000 Common Shares subject to stock options granted to Mr.
Cowen under the 1988 Stock Option Plan for Non-Employee Directors
exercisable on or prior to May 30, 1995.
(11) Includes 306,625 Common Shares subject to stock options granted under
the Company's Stock Option Plans and exercisable on or prior to May
30, 1995 and 182,500 Common Shares of restricted stock awarded under
the Company's Executive Incentive Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Unless otherwise indicated, the following table and notes thereto set
forth information as to the only persons or groups known to the Company, as of
March 31, 1995, to be beneficial owners (as defined by the Securities and
Exchange Commission) of more than five percent of the outstanding Common Shares
of the Company. Unless otherwise indicated, each of the owners listed in the
following table has sole voting and investment power with respect to the Common
Shares set forth opposite their names:
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS COMMON SHARES PERCENT
OF BENEFICIAL OWNERS BENEFICIALLY OWNED OF CLASS
- -------------------- ------------------ --------
<S> <C> <C>
FMR Corp. 1,236,844(1)(2) 13.47%
Edward C. Johnson 3d
82 Devonshire Street
Boston, MA 02109
Mr. and Mrs. Martin Rosskamm 874,468(3)(4) 9.53%
5555 Darrow Road
Hudson, OH 44236
First Pacific Advisors, Inc. 758,939(1) 8.27%
11400 West Olympic Boulevard
Suite 1200,
Los Angeles, CA 90064
Mr. and Mrs. Justin Zimmerman 687,303(3)(5) 7.49%
5555 Darrow Road
Hudson, OH 44236
Mr. Alan Rosskamm 590,222(3)(6) 6.34%(6)
5555 Darrow Road
Hudson, OH 44236
The State Teachers Retirement 553,900(7) 6.03%
Board of Ohio (STRS)
275 East Broad Street
Columbus, OH 43215
The Capital Group Companies, Inc. 500,000(8) 5.45%
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
Page 33
<PAGE> 34
- ---------------
(1) The Common Shares listed are reported on a Schedule 13G filed with the
Securities and Exchange Commission with respect to holdings as of
December 31, 1994.
(2) Fidelity Management & Research Company, a wholly owned subsidiary of
FMR Corp. ("Fidelity"), reported beneficial ownership of 1,221,811
Common Shares as a result of acting as investment advisor to several
investment funds that hold such Common Shares (the "Funds"), including
372,311 Common Shares from the assumed conversion of $18,150,000
principal amount of 6.25% Convertible Subordinated Debentures of the
Company (the "Debentures") held by such Funds. The voting of these
1,211,811 Common Shares is directed by each of the Funds' Boards of
Trustees. In addition, Fidelity Management Trust Company, a wholly
owned subsidiary of FMR Corp. ("FMTC"), reported beneficial ownership
of 15,033 Common Shares, including 13,333 Common Shares from the
assumed conversion of $650,000 principal amount of Debentures held by
FMTC.
(3) With respect to Common Shares beneficially owned by such persons under
the Company's Employees' Savings and Profit Sharing Plan, the Common
Shares included are as of December 31, 1994, the latest date for which
statements are available.
(4) Includes 19,203 Common Shares held by Mrs. Rosskamm as custodian for
the benefit of her grandchildren. Of these 874,468 Common Shares, Mr.
Rosskamm disclaims beneficial ownership of 694,479 Common Shares
beneficially owned by his wife and Mrs. Rosskamm disclaims beneficial
ownership of 179,989 Common Shares beneficially owned by her husband.
(5) Of these 687,303 Common Shares, Mr. Zimmerman disclaims beneficial
ownership of 547,862 Common Shares beneficially owned by his wife and
Mrs. Zimmerman disclaims beneficial ownership of 139,441 Common Shares
beneficially owned by her husband.
(6) Includes 129,250 Common Shares subject to stock options granted to Mr.
Rosskamm exercisable on or prior to May 30, 1995, 69,500 Common Shares
held as restricted stock under the Company's Executive Incentive Plan,
and an aggregate of 181,751 Common Shares held by his children,
spouse, or by Mr. Rosskamm as trustee for the benefit of family
members and charities.
(7) The Common Shares listed are reported on a Schedule 13G filed with the
Securities and Exchange Commission with respect to holdings as of
December 31, 1993. No subsequent amendment to the Schedule 13G has
been filed of record with the Securities and Exchange Commission.
(8) Capital Research and Management Company, a registered investment
adviser, and an operating subsidiary of The Capital Group Companies,
Inc., exercised as of December 31, 1994 investment discretion with
respect to 500,000 Common Shares or 5.45% of outstanding shares of the
class, which were owned by various institutional investors. Such
subsidiary has no power to direct the vote of the above shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Ira Gumberg, a Director of the Company, is President and a principal
shareholder of J.J. Gumberg Co. J.J. Gumberg Co. owns or manages numerous
shopping centers, approximately 12 of which contain
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<PAGE> 35
fabric stores of the Company. All of the leases with respect to such stores were
entered into prior to Mr. Gumberg becoming a Director of the Company.
Page 35
<PAGE> 36
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this Amendment No. 2 to Annual
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto
duly authorized.
FABRI-CENTERS OF AMERICA, INC.
By: /s/Alan Rosskamm June 30, 1995
----------------------------------------
Alan Rosskamm
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this Amendment No. 2 to Annual Report on Form 10-K has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated:
Signature Title Date
---------------------------------- -----------
/s/Alan Rosskamm Chairman of the Board and Director
- ------------------------ (Chief Executive Officer)
Alan Rosskamm
/s/Robert Norton* Vice Chairman and Director
- -------------------------- (Chief Accounting Officer)
Robert Norton
/s/Betty Rosskamm* Director
- ------------------------
Betty Rosskamm
/s/Alma Zimmerman* Director
- ----------------------
Alma Zimmerman
/s/Samuel Krasney* Director June 30, 1995
- -------------------------
Samuel Krasney
/s/Scott Cowen* Director
- --------------------------
Scott Cowen
/s/Frank Newman* Director
- ------------------------
Frank Newman
/s/Ira Gumberg* Director
- --------------------------
Ira Gumberg
The undersigned, by signing his name hereto, does hereby sign
this Amendment No. 2 to Annual Report on Form 10-K on behalf of the above-named
officers and directors of Fabri-Centers of America, Inc., pursuant to powers of
attorney executed on behalf of each of such officers and directors and
previously filed with the Securities and Exchange Commission.
*By: /s/Alan Rosskamm June 30, 1995
--------------------------------
Alan Rosskamm, Attorney-in-Fact
Page 36
<PAGE> 37
FABRI-CENTERS OF AMERICA, INC.
FORM 10-K/A FOR THE FISCAL YEAR ENDED JANUARY 28, 1995
AMENDMENT NO. 2
EXHIBIT INDEX
<TABLE>
<CAPTION>
Official Sequential
Exhibit No. Description Page No.
----------- ----------------------------------------------- ----------
<S> <C> <C>
23 Consent of Independent Public Accountants 38
</TABLE>
Page 37
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report included in this Form 10-K/A into the Company's
previously filed Registration Statements (Form S-8) pertaining to the
Fabri-Centers of America, Inc.'s Executive Incentive Plan (Nos. 2-73332 and
33-49688), the Employee Savings and Profit Sharing Plan (No. 33-32809), the 1988
Stock Option Plan for Non-Employee Directors (No. 33-38681) and the 1990
Employees Stock Option and Stock Appreciation Rights Plan (Nos. 33-37355 and
33-49690).
Arthur Andersen LLP
Cleveland, Ohio,
June 30, 1995.
Page 38
