-----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, oxdeROhziLdjZIo62RYPQaEf3fehTee9l51qgVKaPxUcwHxMH3eBzzqZQWWqlGSN BYLxqdPVyAhH6McLa7nL5A== 0000950152-95-000763.txt : 19950428 0000950152-95-000763.hdr.sgml : 19950428 ACCESSION NUMBER: 0000950152-95-000763 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950128 FILED AS OF DATE: 19950427 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 SEC ACT: 1934 Act SEC FILE NUMBER: 001-06695 FILM NUMBER: 95531702 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 1 FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 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 Identification No.) incorporation or organization) 5555 Darrow Road 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 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 registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. [ ] As of March 31, 1995, 9,179,817 shares of Common Stock were outstanding and the aggregate market value of the shares of Common Stock (based upon the closing price on March 31, 1995 of these shares on the New York Stock Exchange) of the Registrant held by persons other than affiliates of the Registrant was approximately $126.4 million. The exhibit index begins on page 36. Documents incorporated by reference: Portions of the following documents are or will be incorporated by reference: Proxy Statement for 1995 Annual Meeting of Shareholders (Part III) Sequential page 1 of 42 2 PART I Except as otherwise stated, the information contained in this report is given as of January 28, 1995, the end of the Registrant's latest fiscal year. The term "Registrant" or "Company" as used herein refers to Fabri-Centers of America, Inc. and its subsidiaries. ITEM 1. BUSINESS -------- (a) The Registrant, an Ohio corporation with principal offices in Hudson, Ohio, is a leading national specialty retailer that operates retail stores in the fabric and craft industry. Although the Company was incorporated in February 1951, the business conducted by its predecessors began in 1943 when the first store was opened in Cleveland, Ohio offering fabrics and notions for sale under the name "Cleveland Fabric Shops." The Registrant's principal business is conducted in the retail fabric and craft industry through specialty stores which sell a wide variety of fashion and decorator fabrics, notions, crafts, patterns and sewing accessories. On October 2, 1994, the Registrant acquired Cloth World, a division of Brown Group Inc. This acquisition added 342 stores to the number of stores being operated at that time. At January 28, 1995, the Registrant operated 964 stores in 48 states. The majority of the Registrant's stores currently do business under the names of "Jo-Ann Fabrics," "Cloth World," "Jo-Ann Fabrics & Crafts" and "New York Fabrics." The total number of stores in operation at January 28, 1995 by state was as follows: Alabama............................ 6 Montana............................ 2 Alaska............................. 3 Nebraska........................... 1 Arizona............................ 16 Nevada............................. 2 Arkansas........................... 4 New Hampshire...................... 9 California......................... 58 New Jersey......................... 16 Colorado........................... 16 New Mexico......................... 5 Connecticut........................ 15 New York........................... 44 Delaware........................... 3 North Carolina..................... 8 Florida............................ 78 North Dakota....................... 3 Georgia............................ 19 Ohio............................... 96 Idaho.............................. 3 Oklahoma........................... 9 Illinois........................... 52 Oregon............................. 15 Indiana............................ 38 Pennsylvania....................... 59 Iowa............................... 4 Rhode Island....................... 2 Kansas............................. 8 South Carolina..................... 2 Kentucky........................... 8 South Dakota....................... 3 Louisiana.......................... 15 Tennessee.......................... 9 Maine.............................. 4 Texas.............................. 81 Maryland........................... 28 Utah............................... 5 Massachusetts...................... 22 Vermont............................ 4 Michigan........................... 64 Virginia........................... 29 Minnesota.......................... 25 Washington......................... 23 Mississippi........................ 1 West Virginia...................... 9 Missouri........................... 16 Wisconsin.......................... 22
Page 2 3 The following table sets forth the number of stores opened, closed and acquired by the Registrant during each of the past five fiscal years:
Stores in Fiscal Stores Stores Stores Operation Year Opened Closed Acquired at Yearend ------ ------ ------ -------- ---------- 1991 97 95 -- 617 1992 121 102 28 664 1993 171 142 -- 693 1994 27 65 -- 655 1995 38 71 342 964
In addition to the 342 Cloth World stores acquired during fiscal 1995, the Registrant continued its superstore conversion program, opening 38 superstores (over 9,000 square feet) in strip shopping centers, while closing 71 smaller stores. At the end of fiscal 1995, 83% of the Registrant's stores were superstores. In fiscal 1996, the Registrant expects to open approximately 45 superstores while closing 35 smaller locations. All but three of the Registrant's stores are located in leased facilities that average approximately 11,850 square feet. These stores are located in strip shopping centers, malls and free standing buildings within selected marketing areas. The Registrant varies its merchandising selection and inventory levels to conform with the various store layouts. The Registrant, in general, owns all of the fixtures used in its stores. All stores are similar in physical layout. The Registrant believes that it effectively utilizes its selling space and that its equipment is maintained and suitable for its requirements. It is the Company's policy to transfer fixtures and inventory from closed stores to its new superstores. During the fiscal year ended January 28, 1995, the average investment in each new superstore was approximately $110,000 for leasehold improvements and additional fixtures and approximately $80,000 for incremental inventory. It is the Registrant's policy to charge operations for its pre-opening expenses as incurred, which is generally the same period as the store is opened. Store pre-opening costs consist chiefly of the cost of training sales personnel, advertising, stocking and incidental supplies. Each of the Registrant's stores sells a wide variety of merchandise primarily for customers to make their own clothing and to complete home decorating and craft projects. The fabrics that are sold by the Registrant include woolens, rayons, cottons, laces, synthetics, drapery and home furnishings and are customarily sold by the yard. Notions sold by the Registrant include cutting instruments, trimmings, buttons, threads, and zippers. Crafts sold by the Registrant include seasonal merchandise, craft supplies, fabric paints, florals and stitchery. The Registrant had 602 stores in operation for the full fiscal year ended January 28, 1995, with average sales of $917,000 per store. All items are sold for cash or through the use of various bank charge plans. In each of its stores the Registrant employs a manager, assistant store manager, and full-time and part-time sales associates as required. Each store is under the supervision of a district manager who in turn reports to a regional manager. Page 3 4 Substantially all of the merchandising functions, including purchasing, allocation, distribution and control, in addition to accounting, real estate, advertising, and supplies purchasing functions are centralized at the Registrant's corporate offices. The objective of the Registrant's centralized control system is to allow each store manager and sales associate the opportunity to devote maximum effort toward sales of merchandise and customer service. The Registrant's centralized human resource department and field management organization are responsible for recruiting new store managers. A prospective store manager is assigned to an existing store as a manager-trainee for several weeks and receives in-depth on-the-job training. In addition, periodic training seminars are conducted for prospective new managers as well as existing store managers. Sales associates are trained on the job. For the three fiscal years ended January 28, 1995, the Registrant's business resulted from sales of the following principal products:
Fiscal Year Ended ------------------------------------------------------------- January 28, January 29, January 30, Principal Product 1995 1994 1993 - ------------------ ----------- ----------- ----------- Fabric 49.2% 47.3% 45.7% Notions 20.8% 19.1% 21.2% Crafts 26.3% 29.6% 27.9% Other 3.7% 4.0% 5.2%
In the fourth quarter of fiscal 1993, the Registrant decided to sell its retail housewares division, Cargo Express Stores, in order to more fully concentrate its Management's efforts on its core fabric business. As the Company was unable to locate a buyer, the decision was made in the fourth quarter of fiscal 1994 to liquidate this division. The sales information presented above excludes any effect of this housewares division, which has been classified as a discontinued operation since fiscal 1993. (b) The Registrant is a specialty retailer that operates retail stores in the fabric and craft industry. (c) The following information is furnished in response to Item 101 (c) and (d) of Regulation S-K. STATUS OF PRODUCT OR LINE OF BUSINESS. During the last fiscal year, there has been no public announcement nor is there a public announcement anticipated, about either a new product line or line of business involving the investment of a material portion of the Registrant's assets. SOURCE AND AVAILABILITY OF RAW MATERIALS. There are various sources of supply available for each category of merchandise sold by the Registrant. The Registrant has no long-term purchase commitments with any of its suppliers. The Registrant imports approximately 14.3% of its purchases, which are bought in United States currency. PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND CONCESSIONS. The Registrant does not own material patents, trademarks, licenses, franchises, and/or concessions. SEASONAL BUSINESS. The Company's business exhibits seasonality, which is typical for most retail Page 4 5 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. DEPENDENCE ON SINGLE OR FEW CUSTOMERS. The Registrant is engaged in the retail sale of merchandise to the general public and, accordingly, no part of the business of the Registrant is dependent upon a single customer or a few customers. During the fiscal year ended January 28, 1995, no one store accounted for more than 1% of total sales. BACKLOG OF ORDERS. The Registrant is engaged in the retail sale of merchandise to the general public on a cash and carry basis and, accordingly, has no backlog of orders. COMPETITIVE CONDITIONS. The retail fabric and craft industry is highly competitive. The Registrant's stores compete with other specialty fabric and craft retailers, craft retailers and mass merchants on the basis of assortment, price and convenience. Some of the Registrant's competitors, particularly mass merchants may have greater financial and other resources than the Registrant. The retail fabric and craft industry is contracting and consolidating after several years of intense competition. With the acquisition of Cloth World in fiscal 1995, the Registrant became the leading national fabric and craft retailer with approximately twice as many stores as each of the next two largest fabric and craft retail competitors. In addition to its national competitors, the Registrant also competes with many individual retailers and regional chains. RESEARCH AND DEVELOPMENT. During the three fiscal years ended January 28, 1995, the Registrant has not incurred any material expense on research activities relating to the development of new products or services or the improvement of existing products or services that were company-sponsored or customer-sponsored. ENVIRONMENTAL DISCLOSURE. The Registrant is not engaged in manufacturing. Accordingly, the Registrant does not believe that compliance with federal, state and local provisions regulating the discharge of material into the environment or otherwise relating to the protection of the environment will have any material effects upon the capital expenditures, earnings or competitive position of the Registrant. NUMBER OF EMPLOYEES. The Registrant has approximately 17,600 permanent full-time and part-time employees, 16,800 of whom work in the Registrant's retail stores. Additional part-time employees are hired during peak selling periods. Approximately 300 employees in the Hudson distribution center are covered by a collective bargaining agreement with the United Steelworkers of America, Upholstery and Allied Industries Division. This agreement expires in May 1998. The Registrant considers its relationships with its employees to be good. FOREIGN OPERATIONS AND EXPORT SALE. Although the Registrant imports a significant percentage of its merchandise from foreign countries, the loss of any sources of supply from any of such foreign countries would not be material to the business of the Registrant. The Registrant had no export sales. ITEM 2. PROPERTIES ---------- The Registrant's corporate offices and distribution center are located in an approximately Page 5 6 1,400,000 square foot Registrant-owned facility on approximately 120 acres in Hudson, Ohio. The distribution operations occupy approximately 1,000,000 square feet and an additional 100,000 square feet are used by the Registrant's corporate offices and a prototype store. The Registrant leases approximately 200,000 square feet of the facility to an unrelated third party and the remaining square footage is available for lease. The Registrant believes that the facility will meet its requirements for the foreseeable future. Adjacent to the Hudson facility, the Registrant owns approximately 150 acres of undeveloped land, which it holds for sale. Except as stated elsewhere in this Annual Report, the remaining properties occupied by the Registrant are leased retail store facilities that are located primarily in high-traffic shopping centers. All store leases are operating leases generally for periods up to ten years with renewal options for up to twenty years. Certain retail store leases contain escalation clauses and in some cases provide for contingent rents based on a percent of sales in excess of defined minimums. During the fiscal year ended January 28, 1995, the Registrant incurred $55,377,000 of expenses for store rentals. ITEM 3. LEGAL PROCEEDINGS ----------------- The Registrant is not a party to any pending legal proceedings other than (a) litigation fully covered by insurance or (b) commercial and other litigation not substantial in number or amount that is normally incidental to the operation of the business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- None. Page 6 7 Executive Officers of the Registrant ------------------------------------ The information below is included in this report pursuant to instruction 3 to item 401 (b) of Regulation S-K. The Executive Officers of the Registrant are as follows:
Name Executive Office Age - --------------------------- ----------------------------------------------------------- ------- Alan Rosskamm Chief Executive Officer of the Company for more than 5 years, since April 1993, President, and since July 1992, Chairman of the Board; prior to July 1992, President of the Company for more than 5 years. 45 Robert Norton Vice Chairman of the Board/Chief Financial Officer since March 1993; Executive Vice President September 1988 to March 1993; Chief Financial Officer since September 1987, and Chief Administrative Officer May 1990 to March 1993, of the Company. 48 Jane Aggers Executive Vice President, Merchandising and Marketing since April 1993; Senior Vice President, General Merchandise Manager since May 1990; Vice President, Fabric Merchandising since April 1988, of the Company. 46 John Stec Senior Vice President, Real Estate of the Company for more than 5 years. 70 Frederick Johnson Senior Vice President, Management Information Systems since March 1992; Vice President, Management Information Systems from December 1989 to March 1992, of the Company. 48
Page 7 8 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER ---------------------------------------------------------------- MATTERS ------- The Registrant's common stock is traded on the New York Stock Exchange under the ticker symbol FCA. At the close of business on March 31, 1995, the Registrant had 999 shareholders of record. The quarterly high and low stock prices for the fiscal years 1995 and 1994 are presented in the table below:
Fiscal Quarter Ended High Low - ---------------------------------------------------------------------------------------------------- April 30, 1994 $ 17 3/8 $ 15 5/8 July 30, 1994 15 1/2 12 7/8 October 29, 1994 17 7/8 11 3/4 January 28, 1995 17 3/4 14 3/8 Fiscal Quarter Ended High Low - ---------------------------------------------------------------------------------------------------- May 1, 1993 $ 16 3/8 $ 12 7/8 July 31, 1993 15 12 5/8 October 30, 1993 15 5/8 13 January 29, 1994 19 15 5/8
The Registrant intends to follow a dividend policy of retaining earnings for the operation and growth of its business. Payment of dividends in the future will be determined by the Registrant's Board of Directors in light of appropriate business conditions. The Registrant did not pay dividends on its common stock during fiscal 1995 and fiscal 1994. Page 8 9 ITEM 6. SELECTED FINANCIAL DATA ----------------------- FINANCIAL SUMMARY Fabri-Centers of America, Inc.
January 28, January 29, January 30, February 1, February 2, 1995 1994 1993 1992 1991 Years ended (52 weeks) (52 weeks) (52 weeks) (52 weeks) (53 weeks) ================================================================================================================================== (Thousands of dollars, except per share data) OPERATIONS Net sales $ 677,279 $ 582,071 $ 574,120 $ 441,978 $ 368,608 Cost of goods sold 378,593 329,950 329,058 233,580 202,758 Selling, general and administrative expenses 271,187 235,439 231,261 177,285 144,104 Interest expense, net 8,418 5,547 5,522 2,870 3,599 Earnings from continuing operations before income taxes 19,081 11,135 8,279 28,243 18,147 Income taxes 7,347 4,176 3,105 10,166 6,806 Earnings from continuing operations 11,734 6,959 5,174 18,077 11,341 Loss from discontinued operations -- (5,201) (2,994) (564) (117) Extraordinary item -- -- 2,052 -- -- Cumulative effect of accounting change -- 399 -- -- -- Net earnings $ 11,734 $ 2,157 $ 4,232 $ 17,513 $ 11,224 - --------------------------------------------------------------------------------------------------------------------------------- DATA PER COMMON SHARE (a) Earnings from continuing operations - Primary $ 1.26 $ 0.75 $ 0.54 $ 1.96 $ 1.44 - Fully diluted 1.26 0.75 0.54 1.96 1.44 Average shares and equivalents outstanding 9,343,663 9,284,521 9,631,537 9,198,792 7,891,213 Book value 17.58 16.38 16.00 15.34 10.32 Shares outstanding, net of treasury 9,198,911 9,097,098 9,277,256 9,292,029 7,457,653 - --------------------------------------------------------------------------------------------------------------------------------- FINANCIAL POSITION Current assets $ 325,706 $ 247,650 $ 255,211 $ 219,734 $ 159,411 Merchandise inventories 290,560 224,803 223,648 183,315 135,242 Property and equipment, net 84,122 75,633 77,914 54,640 33,928 Total assets 427,304 340,373 351,619 284,060 204,593 Current liabilities 127,459 80,195 93,584 97,781 71,959 Long-term debt 70,000 45,500 47,100 40,100 52,100 Convertible subordinated debentures 56,983 56,983 56,983 -- -- Total liabilities 265,585 191,361 203,145 141,537 127,610 Shareholders' equity 161,719 149,012 148,474 142,523 76,983 Working capital 198,247 167,455 161,627 121,953 87,452 Working capital increase 30,792 5,828 39,674 34,501 20,291 - --------------------------------------------------------------------------------------------------------------------------------- GENERAL STATISTICS (FROM CONTINUING OPERATIONS) Sales increase 16 % 1 % 30 % 20 % 14 % Net earnings increase (decrease) 69 % 34 % (71 %) 59 % 27 % Return on sales: Before income taxes 2.8 % 1.9 % 1.4 % 6.4 % 4.9 % After income taxes 1.7 % 1.2 % 0.9 % 4.1 % 3.1 % Return on average shareholders' equity 7.6 % 4.7 % 3.6 % 16.5 % 15.6 % Current ratio 2.56 to 1 3.09 to 1 2.73 to 1 2.25 to 1 2.22 to 1 Depreciation 11,945 10,053 8,045 5,627 4,831 Debt to capitalization 44.0 % 40.7 % 41.2 % 22.0 % 40.4 % Times interest earned (b) 3.3x 3.0x 2.5x 10.8x 6.0x Number of stores in operation 964 655 693 664 617 - ----------------------------------------------------------------------------------------------------------------------------------- (a) Number of shares outstanding and per share data have been adjusted to reflect the three-for-two stock split in January 1991. (b) Ratio of pre-tax earnings before interest, discontinued operation, extraordinary item and cumulative effect of accounting change to net interest expense.
Page 9 10 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 that may be revised; 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% ===== ===== =====
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 Page 10 11 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, 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". 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 Page 11 12 subordinated debentures, due March 1, 2002. This extraordinary gain increased fiscal 1993 earnings by $0.21 per share. 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 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. 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. 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 by approximately $30 million from year end 1995 levels. 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. Page 12 13 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 13 14 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 14 15 CONSOLIDATED BALANCE SHEETS FABI-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 15 16 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 16 17 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 17 18 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 18 19 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 Page 19 20 to 20 years. Amortization expense was $841,000, $844,000, and $820,000 in fiscal 1995, 1994, and 1993, respectively. 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. 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 Page 20 21 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 21 22 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 22 23 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 23 24 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 the 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 24 25 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 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 29, 1994 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 7, 1996. 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 25 26 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 26 27 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 27 28 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 which may be revised; 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. 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
Page 28 29 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 29 30 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 30 31 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 31 32 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 32 33 ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information required by this Item 10 as to the Directors of the Registrant will be incorporated herein by reference to the information set forth under the caption "Nominees to the Board of Directors" in the Registrant's definitive proxy statement for its 1995 Annual Meeting of Shareholders. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item 11 will be incorporated herein by reference to the information set forth under the caption "Director's and Executive Compensation" in the Registrant's definitive proxy statement for its 1995 Annual Meeting of Shareholders. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item 12 will be incorporated herein by reference to the information set forth under the captions, "Security Ownership of Management" and "Security Ownership of Certain Beneficial Owners" in the Registrant's definitive proxy statement for its 1995 Annual Meeting of Shareholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. Page 33 34 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements 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 Financial Statements Report of Independent Public Accountants 2. Financial Statement Schedules Selected Quarterly Financial Data for the Fiscal Years Ended January 28, 1995, and January 29, 1994 are included in Part II, Item 8 All other schedules have been omitted because the required information is shown in the consolidated financial statements or notes thereto, because the amounts involved are not significant or because the required subject matter is not applicable to the Registrant. 3. Exhibits See the Exhibit Index at sequential page 36 of this report. (b) Reports on Form 8-K. During the quarter ended January 29, 1995, the Registrant filed a report on Form 8-K/A No. 1 dated December 12, 1994 as an amendment to the Form 8-K dated October 2, 1994. The Registrant reported under Item 7 ("Financial Statements, Pro Forma Financial Information and Exhibits") the required financial statements and pro forma financial information related to the acquisition of Cloth World, a division of Brown Group Inc. This report also updated and filed certain documents. Page 34 35 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. FABRI-CENTERS OF AMERICA, INC. By: /s/Alan Rosskamm April 24, 1995 ------------------------------------- Alan Rosskamm President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report 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 --------------------- Alan Rosskamm (Chief Executive Officer) /s/Robert Norton* Vice Chairman and Director --------------------- Robert Norton (Chief Accounting Officer) /s/Betty Rosskamm* Director -------------------- Betty Rosskamm /s/Alma Zimmerman* Director -------------------- Alma Zimmerman /s/Samuel Krasney* Director April 24, 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 Form 10-K Annual Report 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. *By: /s/Alan Rosskamm April 24, 1995 -------------------------------- Alan Rosskamm, Attorney-in-Fact Page 35 36 FABRI-CENTERS 0F AMERICA, INC. FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 28, 1995 EXHIBIT INDEX
Official Sequential Exhibit No. Description Page No. - ----------------- ----------------------------------------------------------------------- ------------- 2 Asset Purchase Agreement among Fabri-Centers of America, Inc., *** FCA of Ohio, Inc., Brown Group, Inc. and Cloth World, Inc. dated August 24, 1994 3 (a) Amended Articles of Incorporation * 3 (b) Amended Regulations * 4 (a) Rights Agreement, dated October 23, 1990, by and between the * Registrant and Ameritrust Company National Association, as rights agent 4 (b) Form of Indenture, dated as March 13, 1992, between the ** Registrant and Ameritrust Company N.A., as trustee relating to the 6 1/4% Convertible Subordinated Debentures due March 1, 2002 4 (c) Specimen Certificate for 6 1/4% Convertible Subordinated * Debentures due March 1, 2002 10 (a) Form of Split Dollar Life Insurance Agreement between the * Registrant and certain of its officers # 10 (b) Split Dollar Life Insurance Agreement and Assignment between the * Registrant and Alma Zimmerman dated September 22, 1984 # 10 (c) Fabri-Centers of America, Inc. 1979 Supplemental Retirement * Benefit Plan as amended # 10 (d) Split Dollar Life Insurance Agreements and Assignments between * the Registrant and Betty Rosskamm dated October 19, 1984 # 10 (e) Fabri-Centers of America, Inc. Executive Incentive Plan dated * March 19, 1980 as amended # 10 (f) Form of Employment Agreement between the Registrant and each of * the following Executive Official Officers: Alan Rosskamm, # Robert Norton, Donald Richey and Jane Aggers 10 (g) Severance Agreement between the Registrant and James Monroe, Jr. * dated April 5, 1993 # 10 (h) Fabri-Centers of America, Inc. 1990 Employees Stock Option and * Stock Appreciation Rights Plan as amended #
Page 36 37 Exhibit Index -continued-
Official Sequential Exhibit No. Description Page No. - ----------------- --------------------------------------------------------------------- --------------- 10 (i) Fabri-Centers of America, Inc. 1988 Stock Option Plan for Non- * Employee Directors as amended # 10 (j) Credit Agreement dated as of September 30, 1994 among Fabri- @ Centers of America, Inc. as borrower, the Banks which are Signatories thereto and Society National Bank, as Agent 10 (k) Restated Employment Agreement between Robert L. Norton and *** Fabri-Centers of America, Inc., dated April 22, 1994 # 11 Computation of Earnings Per Share 38 21 List of Subsidiaries 39 23 Consent of Independent Public Accountants 40 24 Directors and Officers Power of Attorney 41 27 Financial Data Schedule 42 * Incorporated by reference to an Exhibit in the Registrant's Form 8-K filed with the Commission on December 1, 1993. ** Incorporated by reference to an Exhibit in the Registrant's Form S-3 filed with the Commission on February 20, 1993. *** Incorporated by reference to an Exhibit in the Registrant's Form 8-K filed with the Commission on October 2, 1994. @ Incorporated by reference to an Exhibit in the Registrant's Form 8-K/A No. 1 filed with the Commission on December 12, 1994. # Management contract or compensatory plan or arrangement.
Page 37 EX-11 2 EXHIBIT 11 1 COMPUTATION OF EARNINGS PER COMMON SHARE EXHIBIT 11 Fabri-Centers of America, Inc. (Thousands of dollars, except share and per share data)
Thirteen Weeks Ended Fifty-Two Weeks Ended ---------------------------------------------------------- January 28, January 29, January 28, January 29, 1995 1994 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ PRIMARY EARNINGS PER SHARE: Earnings from continuing operations before cumulative effect of accounting change $ 14,114 $ 10,540 $ 11,734 $ 6,959 Discontinued operation: Provision for loss on disposal, including estimated operating loss to be incurred through disposal date, net of tax benefit - (5,201) - (5,201) ------------ ------------ ------------ ------------ Earnings before cumulative effect of accounting change 14,114 5,339 11,734 1,758 Cumulative effect of accounting change - - - 399 ------------ ------------ ------------ ------------ Net earnings $ 14,114 $ 5,339 $ 11,734 $ 2,157 ============ ============ ============ ============ Weighted average shares of common stock outstanding during the period 9,209,534 9,084,161 9,156,526 9,079,127 Incremental shares from assumed exercise of stock options (primary) 204,523 250,898 187,137 205,394 ------------ ------------ ------------ ------------ 9,414,057 9,335,059 9,343,663 9,284,521 ============ ============ ============ ============ Primary earnings (loss) per common share: Earnings from continuing operations before cumulative effect of accounting change $ 1.50 $ 1.13 $ 1.26 $ 0.75 Loss from discontinued operation - (0.56) - (0.56) ------------ ------------ ------------ ------------ Earnings before cumulative effect of accounting change 1.50 0.57 1.26 0.19 Cumulative effect of accounting change - - - 0.04 ------------ ------------ ------------ ------------ Net earnings $ 1.50 $ 0.57 $ 1.26 $ 0.23 ============ ============ ============ ============ FULLY DILUTED EARNINGS PER SHARE: Earnings from continuing operations before cumulative effect of accounting change $ 14,114 $ 10,540 $ 11,734 $ 6,959 Interest expense applicable to 6 1/4% convertible subordinated debentures, net of tax 548 556 2,190 2,226 ------------ ------------ ------------ ------------ 14,662 11,096 13,924 9,185 Discontinued operation: Provision for loss on disposal, including estimated operating loss to be incurred through disposal date, net of tax benefit - (5,201) - (5,201) ------------ ------------ ------------ ------------ Earnings before cumulative effect of accounting change 14,662 5,895 13,924 3,984 Cumulative effect of accounting change - - - 399 ------------ ------------ ------------ ------------ Net earnings $ 14,662 $ 5,895 $ 13,924 $ 4,383 ============ ============ ============ ============ Weighted average shares of common stock outstanding during the period 9,209,534 9,084,161 9,156,526 9,079,127 Incremental shares from assumed exercise of stock options (fully diluted) 230,600 297,758 217,973 359,622 Incremental shares from assumed conversion of 6 1/4% convertible subordinated debentures 1,168,882 1,168,882 1,168,882 1,168,882 ------------ ------------ ------------ ------------ 10,609,016 10,550,801 10,543,381 10,607,631 ============ ============ ============ ============ Fully diluted earnings (loss) per common share: Earnings from continuing operations before cumulative effect of accounting change $ 1.38 $ 1.05 $ 1.32 $ 0.86 Loss from discontinued operation - (0.49) - (0.49) ------------ ------------ ------------ ------------ Earnings before cumulative effect of accounting change 1.38 0.56 1.32 0.37 Cumulative effect of accounting change - - - 0.04 ------------ ------------ ------------ ------------ Net earnings $ 1.38 $ 0.56 $ 1.32 $ 0.41 ============ ============ ============ ============
[FN] Note: This calculation is submitted in accordance with Regulation S-K Item 601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive result. Page 38 EX-21 3 EXHIBIT 21 1 EXHIBIT 21 FABRI-CENTERS OF AMERICA, INC. LIST OF SUBSIDIARIES
State of Percent owned Name Incorporation by Registrant - ----------------------------- ----------------------- --------------------- FCA Financial, Inc. Ohio 100% Fabri-Center's of South Dakota, Inc. Ohio 100% Fabri-Center's of California, Inc. Ohio 100% FCA of Ohio, Inc. Ohio 100%
Page 39 EX-23 4 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, 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, April 25, 1995. Page 40 EX-24 5 EXHIBIT 24 1 DIRECTORS AND OFFICERS POWER OF ATTORNEY Securities and Exchange Commission EXHIBIT 24 450 Fifth Street, N.W. Washington, D.C. 20549 RE: Fabri-Centers of America, Inc. Commission File No. 1-6695 1934 Act Filings on Form 10-K For Fiscal Year Ended January 28, 1995 Gentlemen: The above Company is the issuer of securities registered under Section 12 of the Securities Exchange Act of 1934 (the "Act"). Each of the persons signing his or her name below confirms, as of the date appearing opposite his or her signature, that Alan Rosskamm, Robert Norton, and each of them, are authorized on his or her behalf to sign and to submit to the Securities and Exchange Commission such filings on Form 10-K as are required by the Act. Each person so signing also confirms the authority of Alan Rosskamm, Robert Norton, and each of them, to do and perform on his or her behalf, any and all acts and things requisite or necessary to assure compliance by the signing person with the Form 10-K filing requirements. The authority confirmed herein shall remain in effect as to each person signing his or her name below until such time as the Commission shall receive from such person a written communication terminating or modifying the authority. Date Date ---------------- ---------------- /s/Alan Rosskamm 4/21/95 /s/Samuel Krasney 3/17/95 --------------------------------- --------------- ---------------------------------- --------------- Alan Rosskamm Samuel Krasney /s/Robert Norton 4/21/95 /s/Scott Cowen 3/8/95 ---------------------------------- --------------- ----------------------------------- --------------- Robert Norton Scott Cowen /s/Betty Rosskamm 4/21/95 /s/Frank Newman 3/8/95 --------------------------------- --------------- --------------------------------- --------------- Betty Rosskamm Frank Newman /s/Alma Zimmerman 4/21/95 /s/Ira Gumberg 3/9/95 ------------------------------- --------------- ---------------------------------- --------------- Alma Zimmerman Ira Gumberg
Page 41 EX-27 6 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET OF FABRI-CENTERS OF AMERICA, INC. AS OF JANUARY 28, 1995 AND THE CONSOLIDATED STATEMENTS OF INCOME FOR THE FISCAL YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR JAN-28-1995 JAN-30-1994 JAN-28-1995 21,887,000 0 0 0 290,560,000 325,706,000 134,181,000 50,059,000 427,304,000 127,459,000 126,983,000 989,000 0 0 160,730,000 427,304,000 677,279,000 677,279,000 378,593,000 649,780,000 0 0 8,418,000 19,081,000 7,347,000 11,734,000 0 0 0 11,734,000 1.26 1.26
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