Factory Card & Party Outlet Reports Fiscal 2006 Third Quarter Results and Undertakes Process to Explore Strategic Alternatives

  
    
  
  
    
      Factory Card & Party Outlet Corp. (NASDAQ:FCPO) today announced results 
      for the fiscal 2006 third quarter ended October 28, 2006.
    
    
      For the third quarter ended October 28, 2006, net sales increased 1.5 
      percent to $57.1 million compared with $56.2 million for the third 
      quarter of last year. Net loss for the third quarter of 2006 was $17 
      thousand, or $0.01 per basic and fully diluted share. In the third 
      quarter of 2005, the Company reported a net loss of $1.2 million, or 
      $0.39 per basic and fully diluted share. Gross profit, as a percent of 
      net sales for the third quarter of 2006, improved to 36.6 percent, 
      compared to 35.8 percent in the third quarter of last year. Comparable 
      store net sales for the third quarter of 2006 increased 0.1 percent from 
      the same period last year.
    
    
      For the nine months ended October 28, 2006, net sales increased 3.2 
      percent to $180.4 million from $174.9 million in the same period of last 
      year. Net income for the first nine months of 2006 was $2.0 million, or 
      $0.63 per basic and $0.60 per fully diluted share. In the first nine 
      months of 2005, the Company reported net income of $0.2 million, or 
      $0.06 per basic and $0.05 per fully diluted share. Gross profit as 
      percent to net sales improved to 37.0 percent in the first nine months 
      of 2006 compared to 36.5 percent in the prior year. Comparable store net 
      sales for the first nine months of 2006 increased 0.9 percent.
    
    
      “Despite lower than expected Halloween sales, 
      we were able to better manage expenses and improve merchandise margins 
      on a year-over-year basis leading to substantially improved performance 
      in the recent quarter,” stated Gary W. Rada, 
      President and Chief Executive Officer.
    
    
      The Company also announced that the board of directors of the Company 
      has initiated an external process to explore strategic alternatives to 
      enhance stockholder value. Such strategies may include, but are not 
      limited to, acquisitions, the potential sale of the Company, strategic 
      joint ventures, mergers and/or stock repurchases. The board of directors 
      intends to engage an investment banking firm to assist management and 
      the board in exploring strategic alternatives. The Company will evaluate 
      the alternatives and pursue those it believes are in the best interest 
      of the Company and its stockholders. At this time, there can be no 
      assurance that this strategic analysis will result in any transaction(s).
    
    
      “The board has consistently evaluated various 
      ways of improving shareholder value. Today’s 
      announcement to engage an investment banker reflects their ongoing 
      commitment to achieving that goal,” added Mr. 
      Rada.
    
    
      The Company may not make any further announcements regarding its 
      exploration of strategic alternatives unless and until the process is 
      terminated or it executes a definitive agreement relating to a 
      transaction.
    
    
      About Factory Card
    
    
      Factory Card & Party Outlet (www.factorycard.com) 
      based in Naperville, Illinois, is the largest publicly traded retail 
      party chain in the United States. Factory Card & Party Outlet currently 
      operates 191 Company-owned retail stores in 20 states, offering a wide 
      selection of party supplies, greeting cards, giftwrap, balloons, 
      everyday and seasonal merchandise, and other special occasion 
      merchandise at everyday value prices.
    
    
      Certain statements in this news release constitute “forward-looking 
      statements” within the meaning of the Private 
      Securities Litigation Reform Act of 1995. Such forward-looking 
      statements involve known and unknown risks, uncertainties, year-end 
      adjustments and other factors that may cause the actual results, 
      performance or achievements of the Company, or industry results, to be 
      materially different from any future results, performance or 
      achievements express or implied by such forward-looking statements.
    
    
      In general, the results, performance or achievements of the Company and 
      its stores and the value of the Company’s 
      common stock are dependent upon a number of factors including, without 
      limitation, the dependence on key personnel; competition, ability to 
      anticipate merchandise trends and consumer demand; ability to maintain 
      relationships with suppliers; successful implementation of information 
      systems; successful handling of merchandise logistics; inventory 
      shrinkage; ability to meet future capital needs; governmental 
      regulations; and other factors both referenced and not referenced in the 
      Company’s filings with the Securities and 
      Exchange Commission.
    
    
      
        
          
            FACTORY CARD & PARTY OUTLET CORP.
          
        
      
      
        
          AND SUBSIDIARY
        
      
      
        
           
        
      
      
        
          Condensed Consolidated Statements of Operations
        
      
      
        
          (Unaudited)
        
      
      
        
          (Dollar amounts in thousands, except share and per share data)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          Three months

          
            ended 
          
          
            October 28, 
          
          
            2006
          
        
        
        
        
        
        
          Three months

          
            ended 
          
          
            October 29, 
          
          
            2005
          
        
        
        
        
        
        
          Nine months

          
            ended 
          
          
            October 28, 
          
          
            2006
          
        
        
        
        
        
        
          Nine months

          
            ended
          
          
            October 29, 
          
          
            2005
          
        
      
      
        
          Net sales
        
        
          $
        
        
          57,084 
        
        
        
        
          $
        
        
          56,240 
        
        
        
        
          $
        
        
          180,399 
        
        
        
        
          $
        
        
          174,874 
        
      
      
        
          Cost of sales
        
        
        
        
          36,174 
        
        
        
        
        
        
          35,883 
        
        
        
        
        
        
          113,597 
        
        
        
        
        
        
          110,896 
        
      
      
        
          Cost of sales –greeting card inventory 
          write-down
        
        
        
        
          - 
        
        
        
        
        
        
          233 
        
        
        
        
        
        
          - 
        
        
        
        
        
        
          233 
        
      
      
        
          Gross profit
        
        
        
        
          20,910 
        
        
        
        
        
        
          20,124 
        
        
        
        
        
        
          66,802 
        
        
        
        
        
        
          63,745 
        
      
      
        
          Selling, general and administrative expenses
        
        
        
        
          19,882 
        
        
        
        
        
        
          21,093 
        
        
        
        
        
        
          60,339 
        
        
        
        
        
        
          60,773 
        
      
      
        
          Depreciation expense
        
        
        
        
          835 
        
        
        
        
        
        
          749 
        
        
        
        
        
        
          2,414 
        
        
        
        
        
        
          2,005 
        
      
      
        
          Interest expense
        
        
        
        
          239 
        
        
        
        
        
        
          251 
        
        
        
        
        
        
          704 
        
        
        
        
        
        
          548 
        
      
      
        
          Income(loss) before income taxes
        
        
        
        
          (46)
        
        
        
        
        
        
          (1,969)
        
        
        
        
        
        
          3,345 
        
        
        
        
        
        
          419 
        
      
      
        
          Income taxes
        
        
        
        
          (29)
        
        
        
        
        
        
          (762)
        
        
        
        
        
        
          1,310 
        
        
        
        
        
        
          245 
        
      
      
        
          Net income(loss)
        
        
          $
        
        
          (17)
        
        
        
        
          $
        
        
          (1,207)
        
        
        
        
          $
        
        
          2,035 
        
        
        
        
          $
        
        
          174 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Earnings(loss) per share:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Net income(loss) per share - basic
        
        
          $
        
        
          (0.01)
        
        
        
        
          $
        
        
          (0.39)
        
        
        
        
          $
        
        
          0.63 
        
        
        
        
          $
        
        
          0.06 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Weighted average shares outstanding – 
          basic
        
        
        
        
          3,270,785 
        
        
        
        
        
        
          3,079,907 
        
        
        
        
        
        
          3,209,531 
        
        
        
        
        
        
          3,068,906 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income(loss) per share – diluted
        
        
          $
        
        
          (0.01)
        
        
        
        
          $
        
        
          (0.39)
        
        
        
        
          $
        
        
          0.60 
        
        
        
        
          $
        
        
          0.05 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Weighted average shares outstanding – 
          diluted
        
        
        
        
          3,270,785 
        
        
        
        
        
        
          3,079,907 
        
        
        
        
        
        
          3,401,720 
        
        
        
        
        
        
          3,449,241 
        
      
    
    
    
    
      
        
          FACTORY CARD & PARTY OUTLET CORP.
        
      
      
        
          AND SUBSIDIARY
        
      
      
        
           
        
      
      
        
          Condensed Consolidated Balance Sheets
        
      
      
        
          (Unaudited)
        
      
      
        
          (Dollar amounts in thousands)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          
            October 28,2006
          
        
        
        
        
        
        
          
            January 28,2006
          
        
      
      
        
          ASSETS
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Current assets:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Cash
        
        
          $
        
        
          197 
        
        
        
        
          $
        
        
          196 
        
      
      
        
          Merchandise inventories, net
        
        
        
        
          46,961 
        
        
        
        
        
        
          49,552 
        
      
      
        
          Prepaid expenses and other
        
        
        
        
          4,672 
        
        
        
        
        
        
          4,606 
        
      
      
        
          Deferred tax asset, net
        
        
        
        
          3,788 
        
        
        
        
        
        
          3,728 
        
      
      
        
          Total current assets
        
        
        
        
          55,618 
        
        
        
        
        
        
          58,082 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Fixed assets, net
        
        
        
        
          9,709 
        
        
        
        
        
        
          10,247 
        
      
      
        
          Other assets
        
        
        
        
          88 
        
        
        
        
        
        
          104 
        
      
      
        
          Deferred tax asset, net
        
        
        
        
          7,499 
        
        
        
        
        
        
          8,869 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total assets
        
        
          $
        
        
          72,914 
        
        
        
        
          $
        
        
          77,302 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          LIABILITIES AND STOCKHOLDERS’ EQUITY
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Current liabilities:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Line of credit
        
        
          $
        
        
          7,321 
        
        
        
        
          $
        
        
          19,532 
        
      
      
        
          Accounts payable
        
        
        
        
          21,784 
        
        
        
        
        
        
          19,266 
        
      
      
        
          Accrued expenses
        
        
        
        
          10,649 
        
        
        
        
        
        
          8,579 
        
      
      
        
          Capital lease obligations
        
        
        
        
          5 
        
        
        
        
        
        
          15 
        
      
      
        
          Total current liabilities
        
        
        
        
          39,759 
        
        
        
        
        
        
          47,392 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Deferred rent liabilities
        
        
        
        
          1,767 
        
        
        
        
        
        
          1,606 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total liabilities
        
        
        
        
          41,526 
        
        
        
        
        
        
          48,998 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Stockholders’ equity
        
        
        
        
          31,388 
        
        
        
        
        
        
          28,304 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total liabilities and stockholders’ equity
        
        
          $
        
        
          72,914 
        
        
        
        
          $
        
        
          77,302