Hancock Fabrics Announces Board Withdraws Proposal to Effect a Reverse Stock Split
August 04 2014 - 4:57PM
Business Wire
Hancock Fabrics, Inc. (OTC symbol: HKFI) today announced that
the Board of Directors has decided to withdraw Proposal 1, which
relates to the proposed reverse stock split and subsequent
deregistration under the Securities Exchange Act of 1934, from
consideration at the upcoming annual meeting. Under the proposed
one thousand for one reverse stock split of the Company’s
outstanding shares of common stock, fractional shares, which
includes, but is not limited to, all stockholders of the Company
owning fewer than 1,000 pre-Reverse Stock Split shares, resulting
from the Reverse Stock Split would have been cashed out based on a
per share amount of $1.20 per pre-Reverse Stock Split share in lieu
of issuing fractional shares. As a result of the decision, Proposal
one will not be on the Agenda and not considered or voted upon at
the Annual Meeting. All other proposals presented in the Proxy
Statement remain on the agenda for the Annual Meeting.
While the Board of Directors believes the transaction was in the
best interest of the Company and its stockholders at the time of
its proposal, upon review and careful consideration, further
discussions with management and its advisors and other relevant
factors, the Board of Directors has determined that the costs of
the proposed transaction now outweigh the benefits to the Company
and its stockholders. The primary cause is the increased number of
shares that are now held through accounts with fewer than 1,000
shares, mostly from certain holders who are acquiring shares
through multiple accounts with less than 1,000 shares or splitting
their existing holdings, simply in an attempt to receive multiple
fractional share payments. This activity resulted in a significant
increase in the expected cost of the proposed transaction,
eliminating virtually a full year of the potential expected savings
that the Company anticipated would have resulted from going
private. Therefore, the Board of Directors has decided that it is
in the best interest of the Company and its stockholders to
withdraw the proposal from stockholder consideration for the
upcoming Annual Meeting. The Board will continue to monitor the
cost of a reverse stock split or alternative transaction versus the
benefits and may at some point in the future and on such terms as
will be decided to be beneficial at that time pursue another
transaction if and when deemed to be in the best interest of the
Company and its stockholders.
Steve Morgan, President and Chief Executive Officer commented,
“At this time, the Board feels that the expense of the transaction,
due to the abuse of the multiple account purchases, which the
Company mentioned in the 8K filed on July 15, 2014, has grown to a
point that it now exceeds the benefits it would generate for our
remaining stockholders. We look at this transaction just like any
other business investment decision we would make and have decided
not to proceed based on the economics at this time. This does not
mean we wouldn’t propose another similar or alternative transaction
in the future when and if it becomes economically prudent and in
the best interest of the Company and its stockholders.”
Hancock Fabrics, Inc. is committed to being the authority in
fabric, sewing and crafts, serving creative enthusiasts with a
complete selection of fashion and home decorating textiles, sewing
accessories, needlecraft supplies and sewing machines. The Company
currently operates 261 retail stores in 37 states and an Internet
store at www.hancockfabrics.com.
Statements in this news release that are not historical facts
are forward-looking statements that involve risks and uncertainties
which could cause actual results to differ materially from those
contained in the forward looking statements. These risks and
uncertainties include, but are not limited to the following: our
business and operating results may be adversely affected by the
general economic conditions and the ongoing slow economic recovery;
intense competition and adverse discounting actions taken by
competitors, which could have a material effect on our operations;
our merchandising initiatives and marketing emphasis may not
provide expected results; changes in customer demands and failure
to manage inventory effectively could adversely affect our
operating results; our inability to effectively implement our
growth strategy and access funds for future growth may have an
adverse effect on sales growth; our ability to attract and retain
skilled people is important to our success; we have significant
indebtedness and interest rate increases could negatively impact
profitability; our business is dependent on the ability to
successfully access funds through capital markets and financial
institutions and any inability to access funds may limit our
ability to execute our business plan and restrict operations we
rely on for future growth; significant changes in discount rates,
mortality rates, actual investment return on pension assets,
changes in consumer demand or purchase patterns and other factors
could affect our earnings, equity, and pension contributions in
future periods; business matters encountered by our suppliers may
adversely impact our ability to meet our customers’ needs;
tightening of purchase terms by suppliers and their factories may
have a negative impact on our business; we are vulnerable to risks
associated with obtaining merchandise from foreign suppliers;
transportation industry challenges and rising fuel costs may
negatively impact our operating results; delays or interruptions in
the flow of merchandise between our suppliers and/or our
distribution center and our stores could adversely impact our
operating results; changes in the labor market and in federal,
state, or local regulations could have a negative impact on our
business; taxing authorities could disagree with our tax treatment
of certain deductions or transactions, resulting in unexpected tax
assessments; our current cash resources might not be sufficient to
meet our expected near-term cash needs; a disruption in our
information systems would negatively impact our business; a failure
to adequately maintain the security of confidential information
could have an adverse effect on our business; failure to comply
with various laws and regulations as well as litigation
developments could adversely affect our business operations and
financial performance; we may not be able to maintain or negotiate
favorable lease terms for our retail stores; changes in accounting
principles may have a negative impact on our reported results; our
results may be adversely affected by serious disruptions or
catastrophic events, including geo-political events and weather;
changes in newspaper subscription rates may result in reduced
exposure to our circular advertisement; the expected benefits and
costs of the previously proposed going private transaction and
whether the Company in the future considers another going private
transaction and whether such transaction would result in the
anticipated cost savings and benefits; unexpected or unfavorable
consumer responses to our promotional or merchandising programs
could materially adversely affect our sales, results of operations,
cash flow and financial condition; new regulations related to
“conflict minerals” may force us to incur additional expenses, may
make our supply chain more complex and may result in damage to our
reputation with customers; there are risks associated with our
common stock trading on the OTC Markets, formerly known as the
“Pink Sheets”; our stock price has been volatile and could decrease
in value; future sales of our common stock could adversely affect
the market price and our future capital-raising activities could
involve the issuance of equity securities, which could result in a
decline in the trading price of shares of our common stock; we are
currently contemplating a potential reverse stock split and
deregistration under the Exchange Act which could affect the
trading and liquidity of our common stock and the availability of
information about the Company if consummated; we do not expect to
pay cash dividends on shares of our common stock for the
foreseeable future and other risks and uncertainties discussed in
the Company’s Securities and Exchange Commission (“SEC”) filings,
including the risk factors set forth in Item 1A of the Company's
Annual Report on Form 10-K for the year ended January 25, 2014 and
the Company’s other reports with the SEC. The Company undertakes no
obligation to revise these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the
occurrence of unforeseen events.
Hancock Fabrics, Inc.James B. Brown, 662-365-6112Executive Vice
President andChief Financial Officer