Exhibit 99.1
Cautionary Statement Identifying Important Factors that Could Cause the
Company's Actual Results to Differ from those Projected in Forward Looking
Statements
The following factors could affect The Great Train Store Company's actual future
results, including its merchandise sales, expenses, cash flow and net income,
and could cause them to differ from any forward-looking statements made by or on
behalf of the Company:
o Due to the importance of the Christmas selling season to many retailers,
including the Company, and the Company's efforts to open new stores late
in the year to capitalize on increased net sales during the Christmas
season, net sales in the fourth quarter of each year constitute a highly
disproportionate amount of net sales for the entire year and,
historically, has represented all of the Company's income from operations.
As a result, the Company's annual earnings have been and will continue to
be heavily dependent on the results of operations in the fourth quarter of
each year.
o Changes in consumer tastes, spending habits, national, regional or local
economic conditions, population and traffic patterns, all of which could
adversely affect Company sales, expenses and profitability. In particular,
the Company could be affected by an adverse change in the popularity of
trains in general or in the Shining Time Station television series.
Products related to the Shining Time Station television series have
represented a significant portion of the Company's annual net sales in the
past few years. There can be no assurance that the Company will be able to
successfully anticipate and respond to changing conditions affecting
consumer acceptance of its merchandise.
o The results achieved to date by The Great Train Stores may not be
indicative of future operating results. Moreover, because of the
relatively small number of stores, poor operating results at any one store
or any unsuccessful new store opening could negatively impact the
Company's results from operations to a greater extent than would be the
case in a larger chain.
o The Company's continued success and expansion depends, in large part, on
the continued availability of its existing locations and on the Company's
ability to identify and secure suitable additional locations on acceptable
terms in which to construct new stores. The rate of new store openings is
subject to various contingencies, many which of are beyond the Company's
control. These contingencies include, among others, the availability of
new retail space in locations and on terms considered acceptable by the
Company and the progress of construction of the Company's new stores and
of the shopping centers in which they are to be located and the ability to
find, successfully acquire, and effectively operate existing stores.
Moreover, store construction and opening costs could be higher than
expected, and the Company may reduce the rate at which it opens new
stores. While some of the Company's leases contain provisions for renewal
terms, there can be no assurance that such space will continue to be
available to the Company after the expiration of the renewal terms or, if
available, that such space could be obtained on terms considered
acceptable by the Company. Further, certain of the renewal terms provide
for substantial increases in occupancy costs. In addition, deterioration
of shopping centers in which The Great Train Stores are located or
increased competition from newly constructed centers could necessitate
renovation of The Great Train Store or of the center in which it is
located or otherwise adversely impact the Company's sales and/or expenses.
The need for such renovations could involve unanticipated capital
expenditures or result in a decrease in customer traffic, either of which
could adversely affect the Company's operating results.
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o The Company faces substantial competition for consumer dollars, suitable
retail locations, management personnel and products from specialty
retailers and mass merchandisers, including toy stores and merchandisers
of gifts alternative to those offered by the Company. The Company also
experiences significant competition for customers from companies which
market products primarily or exclusively by mail order. Competition from
such sources could increase in the future. Certain of the Company's
competitors have substantially greater financial, marketing and other
resources than the Company, and there can be no assurance that the Company
will be able to compete successfully with them in the future.
o The Company's business is dependent, in part, upon its ability to purchase
and take timely delivery of merchandise from a large number of vendors,
some of which are material to the Company's business. Numerous factors,
many of which are outside the Company's control, could impair the
Company's ability to purchase specialty merchandise or delay the delivery
of merchandise to the Company's stores. Significant deviations in the
amount of merchandise delivered or in the delivery schedule could result
in lost sales due to inadequate inventory, especially during the Christmas
selling season, and have a material adverse effect on the Company's
operating results.
o In order to successfully continue and manage its expansion strategy, the
Company will be dependent on its ability to retain existing personnel and
to hire, train and supervise additional personnel for the new stores to be
opened while maintaining satisfactory levels of customer service at
existing stores.
o The Company's quarterly operating results can be expected to fluctuate as
a result of seasonal fluctuations in consumer demand for the Company's
products, which is highest during the fourth quarter. A significant
portion of the Company's operating expenses are relatively fixed and there
can be no assurance that the Company will report income from operations in
any particular quarter. Accordingly, the market price of the common stock
could be subject to wide fluctuations in price and volume in response to
actual or anticipated variations in quarterly operating results and a
variety of other factors.
o The Company's Certificate of Incorporation and Bylaws include certain
provisions providing for staggered election of directors, broad authority
for the Board of Directors to issue up to 2,000,000 shares of preferred
stock having such attributes as it may determine without stockholder
approval and restrictions on the ability of stockholders to call special
meetings of stockholders. Each of these provisions could have the effect
of discouraging, delaying or preventing a change in control of the
Company, diminishing opportunities for stockholder participation in tender
offers, reducing the influence of stockholders in corporate governance and
inhibiting fluctuations in the market price of the common stock that could
result from attempted takeovers of the Company.
o The Company may require additional financing. There can be no assurance,
however, that any such external funding will be available to the Company,
or, if available, that such funding will be available on terms acceptable
to the Company.
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