-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IreLbAbZ/g6rKGDBzcyKYIWOI/cRDRsqLLaUhkwwcpcUH2OOBW9PTUtB6ClqYI6B Dud5YzdOUtyKWilguRZ2cQ== 0000950152-96-002846.txt : 19960613 0000950152-96-002846.hdr.sgml : 19960613 ACCESSION NUMBER: 0000950152-96-002846 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960427 FILED AS OF DATE: 19960610 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06695 FILM NUMBER: 96579063 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-Q 1 FABRI-CENTERS OF AMERICA, INC. 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 - -------------------------------------------------------------------------------- FORM 10 - Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 - -------------------------------------------------------------------------------- For the Quarter Ended April 27, 1996 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) (216) 656 - 2600 ----------------------------------- (Registrant's telephone number) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest, practicable date. Shares of Class A Common Stock outstanding at May 24, 1996: 8,922,760 Shares of Class B Common Stock outstanding at May 24, 1996: 8,836,463 Sequential Page 1 of 12 2 CONSOLIDATED BALANCE SHEETS (UNAUDITED) Fabri-Centers of America, Inc. (Thousands of dollars)
APRIL 27, JANUARY 27, 1996 1996 - --------------------------------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 10,784 $ 11,552 Merchandise inventories 327,000 337,974 Prepaid expenses and other current assets 11,112 11,860 ----------------- ----------------- Total current assets 348,896 361,386 Property and equipment, at cost: Land 1,777 1,777 Buildings 21,958 21,701 Furniture and fixtures 104,472 103,364 Leasehold improvements 40,433 39,800 ----------------- ----------------- 168,640 166,642 Less accumulated depreciation and amortization 68,745 64,608 ----------------- ----------------- 99,895 102,034 Mortgage receivable 7,346 7,414 Other assets 8,498 8,814 ----------------- ----------------- Total assets $ 464,635 $ 479,648 ================= ================= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 97,862 $ 104,415 Accrued expenses 16,892 20,056 Accrued income taxes 25 370 Deferred income taxes 4,564 4,388 ----------------- ----------------- Total current liabilities 119,343 129,229 Long-term debt 100,200 98,500 Convertible subordinated debentures 56,983 56,983 Deferred income taxes 12,674 12,422 Other long-term liabilities 1,561 1,551 Shareholders' equity: Common Stock: Class A 501 499 Class B 499 496 Additional paid-in capital 74,869 74,216 Other (1,496) (1,688) Retained earnings 117,864 116,794 ----------------- ----------------- 192,237 190,317 Treasury stock, at cost (18,363) (9,354) ----------------- ----------------- Total shareholders' equity 173,874 180,963 ----------------- ----------------- Total liabilities and shareholders' equity $ 464,635 $ 479,648 ================= =================
See notes to consolidated financial statements Page 2 3 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Fabri-Centers of America, Inc. (Thousands of dollars, except share and per share data)
APRIL 27, APRIL 29, THIRTEEN WEEKS ENDED 1996 1995 - --------------------------------------------------------------------------------------------------------------------- Net sales $ 203,028 $ 183,280 Costs and expenses: Cost of goods sold 114,641 102,181 Selling, general and administrative expenses 83,836 78,174 Interest expense, net 2,839 2,473 ------------- ------------- 201,316 182,828 ------------- ------------- Earnings before income taxes 1,712 452 Income tax provision 642 174 ------------- ------------- Net earnings $ 1,070 $ 278 ============= ============= Net earnings per common share: Primary $ 0.06 $ 0.01 ============= ============= Assuming full dilution $ 0.06 $ 0.01 ============= ============= Average shares and equivalents outstanding: Primary 18,810,008 18,936,622 ============= ============= Assuming full dilution 18,830,540 19,015,354 ============= =============
See notes to consolidated financial statements Page 3 4 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Fabri-Centers of America, Inc. (Thousands of dollars)
APRIL 27, APRIL 29, THIRTEEN WEEKS ENDED 1996 1995 - -------------------------------------------------------------------------------------------------------------------------- Operating activities: Net earnings $ 1,070 $ 278 Adjustments to reconcile net earnings to net cash provided by (used for) operating activities: Cancellation of restricted stock awards -- (32) Depreciation and amortization and other noncash expenses 5,272 3,957 Loss on disposal of fixed assets 292 77 Deferred income taxes 428 -- Working capital changes: Merchandise inventories 10,974 (20,013) Prepaid expenses and other current assets 748 1,374 Accounts payable (6,553) 22,769 Accrued expenses (3,164) (10,123) Accrued income taxes (345) (1,961) --------------- ---------------- Net cash provided by (used for) operating activities 8,722 (3,674) Investing activities: Capital expenditures (3,211) (5,664) Acquisition of Cloth World -- (3,710) Mortgage receivable 68 64 Other, net 318 305 --------------- ---------------- Net cash used for investing activities (2,825) (9,005) Financing activities: Proceeds from long-term debt 13,100 4,000 Repayment of long-term debt (11,400) (2,000) Other long-term liabilities 10 71 Proceeds from exercise of stock options 634 114 Purchase of common stock (9,009) (89) --------------- ---------------- Net cash (used for) provided by financing activities (6,665) 2,096 Net decrease in cash (768) (10,583) Cash and cash equivalents at beginning of period 11,552 21,887 --------------- ---------------- Cash and cash equivalents at end of period $ 10,784 $ 11,304 =============== ================ Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 3,490 $ 3,455 Income taxes 560 2,134
See notes to consolidated financial statements Page 4 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Fabri-Centers of America, Inc. April 27, 1996, January 27, 1996 and April 29, 1995 1. Basis of Presentation The accompanying consolidated financial statements include the accounts of Fabri-Centers of America, Inc., and its wholly owned subsidiaries (the "Company") and have been prepared without audit, pursuant to the rules of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although, the Company believes that the disclosures, herein, are adequate to make the information not misleading. The statements should be read in conjunction with the consolidated financial statements and notes, thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended January 27, 1996. In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary for a fair statement of results for the interim periods. 2. Significant Accounting Policies A. Inventories are stated at the lower of cost or market. Cost is determined principally by the last-in, first-out (LIFO) method. B. 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. C. Store opening expenses are charged to operations as incurred, which is generally the same period that the store is opened. D. Depreciation of buildings, furniture and fixtures and leasehold improvements is provided principally by the straight-line method over the estimated useful lives of the assets. E. The Company'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. 3. Earnings Per Share Primary earnings per share equals net earnings divided by the weighted average number of common shares, after giving effect for the assumed exercise of dilutive stock options. Earnings per share assuming full dilution would equal net earnings plus after tax interest incurred on the Company's 6-1/4 percent convertible subordinated debentures divided by the weighted average number of common shares, after giving effect for the assumed exercise of dilutive stock options and assumed shares to be issued on the conversion of the convertible subordinated debentures. The effect of the convertible subordinated debentures are not included in the earnings per share calculation assuming full dilution for the thirteen week periods ended April 27, 1996 and April 29, 1995 because it is anti-dilutive. Earnings per share amounts have been restated to give effect to the increased number of shares outstanding as a result of the Recapitalization Amendment (see note 4). Page 5 6 4. Recapitalization Amendment On August 2, 1995, the shareholders of the Company approved a recapitalization amendment to the Company's Articles of Incorporation ("Recapitalization Amendment") which became effective on that date, creating a new class of nonvoting shares designated as Class B Common Shares and changing each outstanding common share into one Class A and one Class B Common Share. Additionally, the number of authorized Common Shares was increased from 75,000,000 to 150,000,000, consisting of 75,000,000 Class A Common Shares and 75,000,000 Class B Common Shares. Pursuant to this amendment, the Common Shares, with a stated value of $0.10 per share, were changed into one Class A Common Share and one Class B Common Share, with each class having a stated value of $0.05 per share. As a result of the recapitalization, 9,191,514 Class A Common Shares and 9,191,514 Class B Common Shares were outstanding as of the effective date. All earnings per share amounts have been restated to reflect the recapitalization amendment, which has been accounted for as if it were a two-for-one stock split. 5. Capital Stock During the first quarter of fiscal year 1997, the Company purchased 407,525 Class A and 450,506 Class B Common Shares on the open market. The aggregate purchase price of these shares was approximately $9,000,000 which was funded through the Company's revolving credit facility. 6. Legal Proceedings The Company was notified by the staff of the Securities and Exchange Commission that the staff tentatively intends to recommend that the Commission bring an enforcement action against the Company, its chief executive officer and two former officers in connection with the Company's financial statements for its fiscal year ended February 1, 1992, and for the immediately following three quarters, and with the adequacy of certain disclosures relating to such periods. The staff contends that the financial statements were not accurate because of the manner in which the Company calculated one of its inventory-related reserves for such periods. The accounting issues that have been raised are not related to any current period, and no current accounting policies or financial statements are in question. The Company has filed written responses, and met, with the staff to explain the Company's position on the issues raised. If any action is brought, the Company intends to vigorously contest it. Based on information currently available, Management does not believe the impact, if any, of this matter would have a material adverse effect on the Company's financial position. Page 6 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THIRTEEN WEEKS ENDED APRIL 27, 1996 VS. APRIL 29, 1995 Net sales for the first quarter of fiscal 1997 increased 11 percent, or $19,748,000, compared to the first quarter of fiscal 1996. The increase was largely due to higher sales in the Cloth World stores, which throughout fiscal year 1996 were converted to the Jo-Ann Fabrics and Crafts format. Comparable store sales, which primarily reflect the Jo-Ann Fabrics and Crafts stores, increased 7 percent for the first quarter of fiscal 1997 over the same quarter a year earlier. Sales of seasonal merchandise increased in the Jo-Ann stores during the first quarter of fiscal 1997 as compared to the same quarter a year earlier. Gross profit increased $7,288,000 in the first quarter of fiscal 1997 compared to the same quarter of fiscal 1996. As a percentage of net sales, fiscal 1997 first quarter gross profit was 43.5 percent, a decrease of 0.7 percentage points from the same quarter a year earlier. The decrease in the gross profit margin percentage resulted from reduced prices on selected seasonal merchandise in order to stimulate sales and reduce inventories. Selling, general and administrative expenses as a percentage of net sales were 41.3 percent for the first quarter of fiscal 1997, a decrease of 1.4 percentage points from the same quarter a year earlier. Reductions as a percent of sales in advertising and store level payroll expenses primarily accounted for the improvement. The Company's effective income tax rate was 37.5 percent for the first quarter of fiscal 1997 and 38.5 percent for the first quarter of fiscal 1996. Net earnings for the first quarter of fiscal 1997 were $1,070,000, or $0.06 per share, compared to net earnings of $278,000, or $0.01 per share, for the same quarter a year earlier. 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 months of January through August. Accordingly, a loss for the second quarter, which is normally the Company's lowest sales period, is expected. Capital requirements needed to finance the Company's operations fluctuate during the year and reach their highest levels during the second and third fiscal quarters as the Company increases its inventory in preparation for its peak selling season. LIQUIDITY AND CAPITAL RESOURCES Working capital decreased $2,604,000 to $229,553,000 at April 27, 1996, compared to $232,157,000 at January 27, 1996. The ratio of current assets to current liabilities was 2.9:1 at April 27, 1996, and 2.8:1 at January 27, 1996. Page 7 8 The Company generated $8,722,000 of cash from operating activities in the first quarter of fiscal 1997 compared to $3,674,000 of cash used for operating activities in the first quarter of the prior year. As a result of actions taken to improve inventory turnover, inventories were reduced by $10,974,000 during the first quarter of fiscal 1997. Capital expenditures were $3,211,000 for the first quarter of fiscal 1997 as compared to $5,664,000 for the same period of fiscal 1996. For the full year of fiscal 1997, capital expenditures are expected to be approximately $20,000,000 down from $34,732,000 in the prior year. The Company plans to open 50 to 60 superstores and close 60 to 70 smaller stores during fiscal 1997. Higher fiscal 1996 capital expenditures primarily related to the conversion of Cloth World stores to the Jo-Ann Fabrics and Crafts format. The Company purchased 407,525 Class A and 450,506 Class B Common Shares on the open market at an aggregate purchase price of approximately $9,000,000 during the first quarter of fiscal 1997. The remaining number of shares that can be acquired pursuant to prior authorization by the Board of Directors is 597,025 Class A and 557,025 Class B Common Shares. See note 6, Legal Proceedings, in the Notes to Consolidated Financial Statements section elsewhere in this report. The Company has a $200,000,000 revolving credit facility with a group of eight banks that expires on September 30, 1998. The Company may borrow up to a maximum of $220,000,000, subject to further limitations during specified time frames, by utilizing funds available under this credit facility and other lines of credit. As of April 27, 1996, the Company had borrowings of $100,200,000 under the revolving credit facility and other lines of credit. The Company continues to maintain excellent vendor and banking relationships and has sufficient resources, including unused credit facilities, to meet its operating needs and to fund its capital expenditures for fiscal 1997. During the first three months of fiscal 1997, the Company opened 8 superstores and closed 22 smaller stores. As of April 27, 1996, the Company operated 922 stores in 48 states primarily under the names Jo-Ann Fabrics and Crafts, Cloth World and New York Fabrics and Crafts. FORWARD-LOOKING STATEMENTS Certain statements contained in this report that are not historical facts are forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statement. These risks and uncertainties include, but are not limited to, changes in customer demand, changes in trends in the fabric and craft industry, changes in the competitive pricing for products, the impact of competitor store openings and closings, the availability of acceptable store locations, the availability of merchandise, general economic conditions and other risk factors discussed in documents filed by the Company with the Securities and Exchange Commission. Page 8 9 PART II OTHER INFORMATION Item 5. Other Events ------------ Robert Norton resigned as Chief Financial Officer effective May 31, 1996, and delivered his resignation as Director and Vice Chairman of the Board to be effective June 12, 1996. Item 6. Exhibits and Reports on Form 8-K -------------------------------- a) Exhibits -------- See the Exhibit Index at sequential page 11 of this report. b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed during the 13-week period ended April 27, 1996. Page 9 10 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto, duly authorized. FABRI-CENTERS OF AMERICA, INC. DATE: June 10, 1996 /s/ Alan Rosskamm ----------------------------------------- BY: Alan Rosskamm Chairman, President and Chief Executive Officer /s/ Robert R. Gerber ----------------------------------------- BY: Robert R. Gerber Senior Vice President, Controller and Chief Accounting Officer Page 10 11 FABRI-CENTERS OF AMERICA, INC. FORM 10-Q FOR THE THIRTEEN WEEK PERIOD ENDED APRIL 27, 1996 EXHIBIT INDEX
Sequential EXHIBIT NO. Description Page No. - ---------------------- -------------------------------------------------------------- ---------------------- 11 Statement re Computation of Earnings per Common 12 Share 27 Financial Data Schedule
Page 11 EX-11 2 EXHIBIT 11 1 EXHIBIT NO. 11 COMPUTATION OF EARNINGS PER COMMON SHARE FABRI-CENTERS OF AMERICA, INC. (THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
THIRTEEN WEEKS ENDED ------------------------------- APRIL 27, APRIL 29, 1996 1995 - ------------------------------------------------------------------------------------------------------------------------ PRIMARY EARNINGS PER SHARE: Net earnings $ 1,070 $ 278 ============= ============ Weighted average shares of common stock outstanding during the period 18,268,965 18,371,462 Incremental shares from assumed exercise of stock options - primary 541,043 565,160 ------------- ------------ 18,810,008 18,936,622 ============= ============ Net earnings per common share - primary $ 0.06 $ 0.01 ============= ============ EARNINGS PER SHARE ASSUMING FULL DILUTION: Net earnings $ 1,070 $ 278 Interest expense applicable to 6 1/4% convertible subordinated debentures, net of tax 556 548 ------------- ------------ Net earnings $ 1,626 $ 826 ============= ============ Weighted average shares of common stock outstanding during the period 18,268,965 18,371,462 Incremental shares from assumed exercise of stock options - fully diluted 561,575 643,892 Incremental shares from assumed conversion of 6 1/4% convertible subordinated debentures 2,337,764 2,337,764 ------------- ------------ 21,168,304 21,353,118 ============= ============ Net earnings per common share assuming full dilution $ 0.08 (a) $ 0.04 (a) ============= ============ (a) 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.
Note: The number of shares for the periods ended April 29, 1995 have been restated to give effect to the Company's recapitalization amendment, which has been accounted for as if it were a two-for-one stock split. Page 12 EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET OF FABRI-CENTERS OF AMERICA, INC. AS OF APRIL 27, 1996 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE THIRTEEN WEEKS THEN ENDED. 3-MOS FEB-01-1997 JAN-28-1996 APR-27-1996 10,784 0 0 0 327,000 348,896 168,640 68,745 464,635 119,343 157,183 0 1,000 0 172,874 464,635 203,028 203,028 114,641 198,477 0 0 2,839 1,712 642 1,070 0 0 0 1,070 .06 .06
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