House Of Fabrics Returns To Profitability Following Emergence From Chapter 11
SHERMAN OAKS, Calif., Nov. 26, 1996 - House of Fabrics, Inc. (Nasdaq: HFAB),
which emerged from Chapter 11 in August, today reported a return to profitability for
its third fiscal quarter ended October 31, 1996.
For the three-month period, which was the first quarter since emerging from Chapter
11, the company reported net income of $874,000, equal to $0.17 per share compared
with a net loss of $5.5 million, or $0.40 per share, for the comparable prior-year
period. Sales for the third quarter totaled $70.0 million, compared with $92.3 million
last year, reflecting 94 fewer stores in operation and a 4 percent decline in same-store
sales.
For the nine months ended October 31, 1996 (three months of post- bankruptcy
operations "successor" and six months of bankruptcy operations "predecessor"), the
company reported a reduction in its net loss to $10.1 million from $24.5 million a
year ago. Sales for the nine-month period amounted to $181.3 million versus $238.0
million, also reflecting fewer stores in operation and a 2 percent decline in
same-store sales.
The difference in the number of shares outstanding for the current and prior year
reporting periods reflects new shares issued pursuant to the company's plan of
reorganization.
In addition to closing unprofitable and underperforming stores, Gary L. Larkins,
president and chief executive officer, attributed the positive operating performance to
a significant reduction in selling, general and administrative expenses, along with a
major reduction in reorganization costs and interest expense. He noted that for the
third quarter, SG&A expenses as a percentage of sales declined to 39.4 percent from
43.0 percent for the comparable prior- year period. Larkins added that lack of
inventory in the first 30 days after exiting Chapter 11 hurt same-store sales and
earnings for the quarter. However, as stores were restocked, sales rebounded and
were above plan for September and October.
"We are gratified to have achieved profitable operations in our first quarter since
emerging from Chapter 11 and look forward to continuing progress in the months
ahead," said Larkins.
Subsequent to the end of the quarter, House of Fabrics completed the sale of its
previously closed distribution center in Mauldin, South Carolina, for $8.35 million in
cash. Larkins said the transaction marked the completion of a multi-phase program
designed to further reduce debt and place the company in a stronger financial position.
House of Fabrics currently operates 267 company-owned House of Fabrics, Sofro
Fabrics, Fabricland and Fabric King retail fabric and craft stores in 34 states and
employs approximately 7,000 people.
HOUSE OF FABRICS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
Three Months Ended Three Months
Six Months
Nine Months
Ended
Ended
Ended
October 31, October 31, October 31,
July 31,
October 31,
1996 1995 1996
1996 1995
Successor Predecessor Successor
Predecessor
Predecessor
Co. Co. Co.
Co. Co.
Sales $69,953,000 $92,307,000 $69,953,000
$111,355,000
$237,975,000
Expenses:
Cost of
Sales 40,200,000 52,482,000 40,200,000
62,000,000
130,413,000
Selling,
General and
Administra-
tive 27,536,000 39,973,000 27,536,000
53,952,000
113,663,000
Interest 1,319,000 3,263,000 1,319,000
4,911,000
10,788,000
Total
Expenses 69,055,000 95,718,000 69,055,000
120,863,000
254,864,000
Earnings (Loss)
Before Income Taxes
and Reorganization
Costs 898,000 (3,411,000) 898,000
(9,508,000)
(16,889,000)
Reorganization 0 2,054,000 --
1,440,000
7,499,000
Earnings (Loss)
Before Income
Taxes 898,000 (5,465,000) 898,000
(10,948,000)
(24,388,000)
Income Taxes 24,000 50,000 24,000
48,000
150,000
Net Income
(Loss) $874,000 $(5,515,000)
$874,000$(10,996,000)$(24,538,000)
Net Income (Loss)
Per Share $0.17 $(0.40) $0.17
$(0.80)
$(1.79)
Weighted Average
Number of
Shares
Outstanding5,136,415 13,697,107 5,136,415
13,697,107
13,697,107
SELECTED BALANCE SHEET
DATA
October 31, 1996
January 31, 1996
Inventories $111,007,000
$107,140,000
Accounts Payable $16,445,000
$9,754,000
Bank Debt $54,887,000
$102,823,000
Stockholders' Equity (Deficit) $40,020,000
$(15,343,000)
..Note: Current year equity is after adoption of Fresh
Start Accounting.
SOURCE House of Fabrics, Inc./CONTACT: Gary L. Larkins of House of Fabrics,
Inc., 818-385-2300; or Roger S. Pondel of Pondel Parsons & Wilkinson,
310-207-9300/
Creditors Of FoxMeyer Drug File $198 Million Fraud Suit Against FoxMeyer Health
NEW YORK, NY - Nov. 26, 1996 - Yesterday, the official unsecured creditors'
committee of FoxMeyer Corp. and FoxMeyer Drug Company filed a $198 million
fraud suit against FoxMeyer Health Corp., the parent company of FoxMeyer Corp. and
FoxMeyer Drug.
The suit seeks damages for the allegedly fraudulent transfer of assets from FoxMeyer
Corp. and FoxMeyer Drug to FoxMeyer Health resulting from a restructuring in June
1996 undertaken by FoxMeyer Corp. and FoxMeyer Drug just two months before they
filed for chapter 11.
The suit alleges that the transfers were made at a time when FoxMeyer Corp. and
FoxMeyer Drug were insolvent, or were rendered insolvent by the transaction, and
left with unreasonably small capital to conduct their business. The committee also
alleges that FoxMeyer Corp. and FoxMeyer Drug knew or should have known that the
transaction would leave them with debts that exceeded their ability to pay as such
debts matured. Further, the suit alleges that the transfers were orchestrated and caused
by FoxMeyer Health as controlling shareholder and made without any legitimate
business justification.
The suit was filed once the committee and its advisors, the law firm Dewey
Ballantine and the investment banking firm Alex. Brown & Sons, Inc., had completed
a preliminary investigation of the transactions, and the financial condition of
FoxMeyer Corp. and FoxMeyer Drug both before and after the transactions.
The committee hopes the suit will result in enhanced recoveries by unsecured
creditors of FoxMeyer Corp. and FoxMeyer Drug, who are owed an estimated $450
million, and who are facing huge losses in the light of the recent sale of FoxMeyer
Drug's pharmaceutical distribution business to McKesson Corp., which only yielded
$20 million to FoxMeyer Corp. and FoxMeyer Drug net of secured debt.
SOURCE Dewey Ballantine; Alex. Brown & Sons /CONTACT: Richard S. Miller,
Stuart Hirshfield or Sean McKenna of Dewey Ballantine, 212-259-8000; or Barry W.
Ridings of Alex. Brown & Sons, 212-237-2000/
Former Natick Man Sentenced for Bankruptcy Fraud, U.S. Attorney Reports
BOSTON, MA - Nov. 26, 1996 - A Florida man, formerly of Natick, today was
sentenced to three years' probation for concealing his ownership in a computer
software sales company when he filed for bankruptcy.
United States Attorney Donald K. Stern stated that JAMES D. KINKEAD, 58, of
Naples, Florida, and formerly of 48 Birch Road, Natick, Massachusetts, was
sentenced today by United States District Judge Richard G. Stearns to three years'
probation, including four months in home confinement and a $2,000 fine, for
concealing assets in his bankruptcy.
At the time of KINKEAD's plea in July, a prosecutor told the Court that in advance of
filing for personal bankruptcy, KINKEAD transferred the business of his former
computer software sales company, Boston Micro, Inc., to a new entity, Express
U.S.A., Inc., which KINKEAD had set up as being owned by his then wife, without
her knowledge or consent. KINKEAD then failed to disclose his interest in Express
U.S.A. in his bankruptcy.
The case was investigated by the Federal Bureau of Investigation, referred by the U.S.
Trustee's Office in Boston, and prosecuted by Assistant U.S. Attorney Mark J.
Balthazard of Stern's Economic Crimes Unit.
SOURCE U.S. Attorney's Office /CONTACT: Amy Rindskopf or Joy Fallon of U.S.
Attorney's Office, 617-223-9445/
NeoStar Retail Group Sells Assets; Software Acquisition Company LLC Purchases
Assets and Inventory for $58.5 Million
DALLAS, TX - Nov. 26, 1996 - NeoStar Retail Group, Inc. (Nasdaq: NEOSQ),
parent company of Babbage's and Software Etc., announced that Software Acquisition
Company LLC has received Federal Bankruptcy Court approval to purchase
substantially all of the assets of NeoStar. The purchase price of $58.5 million
includes 447 of NeoStar's stores and all of its inventory. Software Acquisition
Company was the successful bidder in an auction process conducted during court
hearings which concluded Tuesday, Nov. 26, 1996.
Software Acquisition Company LLC was recently formed by Leonard Riggio, a
director and stockholder of NeoStar, for purposes of bidding for the NeoStar assets.
Riggio is also chairman and a principal stockholder of Barnes & Noble, Inc., the
nation's largest bookseller, and of Barnes & Noble College Bookstores, Inc., the
nation's largest operator of college bookstores.
Prior to the sale, NeoStar Retail Group operated more than 650 stores and employed
more than 5,000 people. As a result of the sale, approximately 200 of NeoStar's stores
will be closed.
NeoStar filed a voluntary petition to reorganize under Chapter 11 of the U.S.
Bankruptcy Code in Federal Bankruptcy Court in Dallas on Sept. 16, 1996. The
company previously announced that it had decided to auction its assets due to the
absence of viable financing alternatives.
"The Safe Harbor" Statement Under the Private Securities Litigation Act of 1995.
This press release contains forward-looking statements that involve risks and
uncertainties, including but not limited to bankruptcy court approval of those actions
requiring such approval, and other risks detailed from time to time in the company's
Securities and Exchange Commission filings.
SOURCE NeoStar Retail Group, Inc /CONTACT: Paul R. Streiber or Temerlin
McClain, 817-424-2186, both of NeoStar Retail Group, Inc./
Work Recovery, Inc.'s Plan for Reorganization is Confirmed
TUCSON, Ariz., Nov. 26, 1996 - Work Recovery, Inc. (WRI) announced today the
confirmation of its Amended Joint Plan of Reorganization. The Company's
Reorganization Plan was confirmed at a hearing today in the United States Bankruptcy
Court for the District of Arizona. The Bankruptcy Court ruled that the plan was fair
and equitable following the acceptance of the Plan by the Company's creditors and
shareholders. Judge James M. Marlar stated that Work Recovery's confirmation is
"one of the rare cases where shareholders receive anything."
The Plan of Reorganization will allow the Company to restructure its pre- petition
debt and continue operations without Court supervision. Upon emergence from
Chapter 11, expected to be effective February 1, 1997, and completion of its fiscal
1996 quarterly reports, the Company will be in compliance with the Securities and
Exchange Commission and plans to apply for listing with a major stock exchange.
Acting President and Chief Executive Officer Dorcas R. Hardy said, "Emerging from
bankruptcy is a milestone in the turnaround of Work Recovery. It will mean that our
work to restore value to our shareholders and grow this Company has just begun. Our
focus will be upon increased sales, quality of ERGOS(R) training certification,
enhanced customer support and service, and development of new ERGOS(R) related
products." Hardy also stated, "Although our work is far from being done, we are
encouraged about how far the Company has come in a short time."
Work Recovery, Inc. manufactures, markets and licenses its proprietary objective
Functional Capacity Evaluation (FCE) technology, ERGOS(R), for the evaluation of
injured workers.
SOURCE Work Recovery, Inc. /CONTACT: Jake Mendoza, 520-322-6634/