Hancock expects to save $640,000 yearly

Thomas Wells | Buy at photos.djournal.com In the Hancock Fabrics distribution center at the company's headquarters in Baldwyn, one area is used to separate and parcel out the fabrics that will go out to the company's 262 stores.

Thomas Wells | Buy at photos.djournal.com
In the Hancock Fabrics distribution center at the company’s headquarters in Baldwyn, one area is used to separate and parcel out the fabrics that will go out to the company’s 262 stores.

By Dennis Seid

Daily Journal

BALDWYN – Becoming a privately held company will cost Hancock Fabrics about $1.3 million, the fabrics and craft retailer said.

But the Baldwyn-based company also said it expects to save nearly $640,000 a year after the move.

Last month, Hancock Fabrics said the cost of doing business as a publicly traded entity outweighed the benefits, and said it would let its shareholders vote on the move on Aug. 15.

In a proxy filed with the Securities and Exchange Commission last week, Hancock reiterated its desire to go private.

Having been publicly traded since 1987, the company said the move “will eliminate the significant costs and time commitments of our directors and executives related to complying with our obligations as a public company to the benefit of those stockholders remaining after the transaction.

“Since we will no longer have to comply with the public reporting and other requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002, we will no longer need to incur certain expenses relating to printing and mailing stockholder documents, our investor relations function, SEC filing fees and personnel time required to comply with our obligations under certain U.S. federal securities laws.”

The company also said it expects to incur nearly $1.3 million in expenses to make the move:

• About $936,000 will go toward a 1,000-for-1 reverse stock split. Current shareholders with less than 1,000 shares of Hancock stock will be paid $1.20 per share. Those with 1,000 or more shares will remain fractional shareholders in the company after the split.

After the cash payouts, Hancock said it will have 184 shareholders, compared to more than 3,300 today. The number of outstanding shares will be trimmed from 21.6 million to less than 21,000.

• Another $330,000 will go toward “advisory, legal, financial, accounting, printing and other fees and costs related to the move.

If shareholders reject the move to go private, Hancock said “we will continue to operate our business, and we will continue to incur the costs involved with being a public company. We also may decide to evaluate and explore other available alternatives, if the board of directors consider them feasible and advisable.”

For its last fiscal year, Hancock saw sales of $276 million and posted a loss of $1.9 million. That compares to previous-year sales of $278 million and a loss of $1.9 million.

Hancock entered bankruptcy protection in 2007 and emerged in 2008, but has made an annual profit only once since, in FY2009.

Shareholders also will vote on a slate of directors to lead the company. They include current President and CEO Steve Morgan, 62, who’s held those roles since October 2011; Sam P. Cortez, 50, a company director since August 2008; Steven D. Scheiwe, 53, the non-executive chairman of Hancock since August 2009 and director since August 2008; and Neil S. Subin, 49, a company director since August 2009.