-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, sII44uc6R28W31IUWGlyKbs5kYS8Aqw9V9cj2MjnNJwDZsX1ONvSJDg9geC+5gXK Bdx2uxKRCH8a93JjZLeXuw== 0000950152-95-001440.txt : 199507030000950152-95-001440.hdr.sgml : 19950703 ACCESSION NUMBER: 0000950152-95-001440 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950128 FILED AS OF DATE: 19950630 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FABRI CENTERS OF AMERICA INC CENTRAL INDEX KEY: 0000034151 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 340720629 STATE OF INCORPORATION: OH FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-06695 FILM NUMBER: 95551731 BUSINESS ADDRESS: STREET 1: 5555 DARROW RD CITY: HUDSON STATE: OH ZIP: 44236 BUSINESS PHONE: 2166562600 MAIL ADDRESS: STREET 1: 5555 DARROW ROAD CITY: HUDSON STATE: OH ZIP: 44236 FORMER COMPANY: FORMER CONFORMED NAME: CLEVELAND FABRIC SHOPS INC DATE OF NAME CHANGE: 19681216 FORMER COMPANY: FORMER CONFORMED NAME: CLEVELAND FABRIC SHOPS INC NUMBER THREE DATE OF NAME CHANGE: 19681216 10-K/A 1 FABRI-CENTERS OF AMERICA, INC. 10-K/A 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 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.
Percentage Change Percentage of Net Sales From Prior Year ----------------------------------------------------------- 1995 1994 1993 1994 1993 - ----------------------------------------------------------------------------------------------------------- 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% ==== ==== ====
Page 2 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 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 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 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 7 CONSOLIDATED BALANCE SHEETS FABRI-CENTERS OF AMERICA, INC.
January 28, January 29, 1995 1994 - -------------------------------------------------------------------------------- (Thousands of dollars) 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 ========== ==========
See notes to consolidated financial statements Page 7 8 CONSOLIDATED STATEMENTS OF INCOME FABRI-CENTERS OF AMERICA, INC.
JANUARY 28, JANUARY 29, JANUARY 30, YEARS ENDED 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------- (Thousands of dollars, except share and per share data) 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
See notes to consolidated financial statements Page 8 9 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FABRI-CENTERS OF AMERICA, INC.
JANUARY 28, JANUARY 29, JANUARY 30, YEARS ENDED 1995 1994 1993 - ---------------------------------------------------------------------------------------- (Thousands of dollars) COMMON STOCK AT STATED VALUE 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 - ----------------------------------------------------------------------------------------
See notes to consolidated financial statements Page 9 10 CONSOLIDATED STATEMENTS OF CASH FLOWS FABRI-CENTERS OF AMERICA, INC.
JANUARY 28, JANUARY 29, JANUARY 30, YEARS ENDED 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------- (Thousands of dollars) 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) --------------
See notes to consolidated financial statements Page 10 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: Buildings 2-1/2% - 10% Furniture and fixtures 6-2/3% - 20% Leasehold Improvements 6-2/3% - 20%
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, Page 11 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. Page 12 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:
Minimum Fiscal Year Rentals - -------------------------------------------------------------------------------------------------------------------- (Thousands of dollars) 1996 $ 66,007 1997 64,174 1998 62,002 1999 58,541 2000 54,691 Thereafter 132,420 ----------- $ 437,835 ===========
Rent expense was as follows:
Fiscal Year 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------- (Thousands of dollars) 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 ========== ========== ===========
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. Page 13 14 NOTE 5 - CAPITAL STOCK The following table details the common stock activity for fiscal 1995 and fiscal 1994:
$0.10 Common Stock --------------------------------------------- Shares Outstanding Shares Net of Treasury in Treasury - ----------------------------------------------------------------------------------------------------------------- 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 ========= =======
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 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 16 The following is a summary of stock option and stock appreciation rights ("SAR") activity:
Shares Option Price --------------------------------------- Options SAR Per Share - -------------------------------------------------------------------------------------------------------------------- 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
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 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 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:
Fiscal Year 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------- (Thousands of dollars) 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 =========== =========== ===========
The reconciliation of income tax at the statutory rate to total income tax expense is as follows:
Fiscal Year 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------- (Thousands of dollars) 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 ========== ========== ==========
Page 18 19 The significant components of the Company's deferred tax assets and liabilities are as follows:
Asset/(Liability) ------------------------ Fiscal Year 1995 1994 - ---------------------------------------------------------------------------------- (Thousands of dollars) 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) ======== ========
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 20 The following table presents information necessary to calculate primary earnings per share for the periods presented.
Fiscal Year 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------- 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 ========= ========= =========
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 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:
Fiscal Year 1995 1994 - ------------------------------------------------------------------------ (Thousands of dollars, except per share data) 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
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 22 NOTE 15 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
First Second Third Fourth Fiscal 1995 Quarter Quarter Quarter Quarter - ------------------------------------------------------------------------------------------------------------------ (Thousands of dollars, except per share data) 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
First Second Third Fourth Fiscal 1994 Quarter Quarter Quarter Quarter - ------------------------------------------------------------------------------------------------------------------ (Thousands of dollars, except per share data) 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 ========= ========= ========= =========
(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 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 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 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.
PRINCIPAL OCCUPATION PAST FIVE YEARS, DIRECTOR NAME OTHER DIRECTORSHIPS AND AGE SINCE ---- ------------------------------------- -------- 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.
Page 25 26 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.
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 27 SUMMARY COMPENSATION TABLE
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) - ------------------- ------ ---------- --------- ---------- ----------- -------- ------ 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
--------------- (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 Page 27 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. Page 28 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.
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% ---- ---------- ------------ --------- ---------- -------- -------- 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
-------------- (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. Page 29 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.
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 - ---- ----------------- -------- ----------- ------------- ----------- ------------- 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
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" Page 30 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:
NUMBER OF NAME OF COMMON SHARES PERCENT OF CLASS BENEFICIAL OWNER BENEFICIALLY OWNED IF 1% OR MORE ---------------- ------------------ ---------------- 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) --
Page 31 32 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)
- --------------- (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. Page 32 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:
NUMBER OF NAME AND ADDRESS COMMON SHARES PERCENT OF BENEFICIAL OWNERS BENEFICIALLY OWNED OF CLASS - -------------------- ------------------ -------- 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
Page 33 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 Page 34 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 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 37 FABRI-CENTERS OF AMERICA, INC. FORM 10-K/A FOR THE FISCAL YEAR ENDED JANUARY 28, 1995 AMENDMENT NO. 2 EXHIBIT INDEX
Official Sequential Exhibit No. Description Page No. ----------- ----------------------------------------------- ---------- 23 Consent of Independent Public Accountants 38
Page 37 EX-23 2 EXHIBIT 23 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 -----END PRIVACY-ENHANCED MESSAGE-----