<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 29, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ------------ to -------------
Commission File Number 0-7967
FALCON PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 43-0730877
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9387 DIELMAN INDUSTRIAL DRIVE
ST. LOUIS, MISSOURI 63132
(Address of principal executive offices) (Zip Code)
(314) 991-9200
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months, and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
----------- -----------
As of September 7, 1995, the registrant had 8,657,026 shares of common stock,
$.02 par value, outstanding.
Page 1 of 12 pages
Exhibit Index is on page 11 of this report.
<PAGE> 2
PART I - FINANCIAL INFORMATION
----------------------
Item 1. - Financial Statements
--------------------
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Balance Sheets
---------------------------
(Unaudited)
<CAPTION>
July 29, October 29,
1995 1994
----------- -----------
Assets
- ------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,476,475 $ 7,312,189
Accounts receivable, less allowances
of $360,000 and $503,000, respectively 13,161,531 14,318,450
Inventories 15,594,659 13,380,137
Prepaid expenses and other current assets 1,401,357 1,446,826
----------- -----------
Total current assets 37,634,022 36,457,602
----------- -----------
Property, plant and equipment:
Land 2,807,605 1,942,124
Buildings and improvements 11,561,039 10,404,634
Machinery and equipment 19,836,848 18,865,549
----------- -----------
34,205,492 31,212,307
Less accumulated depreciation 13,245,471 12,095,719
----------- -----------
Total property, plant and equipment 20,960,021 19,116,588
----------- -----------
Other assets, net of accumulated amortization:
Excess of cost over fair value of net assets acquired 6,688,090 6,878,260
Other 2,829,428 2,452,703
----------- -----------
Total other assets 9,517,518 9,330,963
----------- -----------
$68,111,561 $64,905,153
=========== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 5,036,996 $ 5,395,549
Accrued liabilities 3,117,533 4,734,911
Current maturities of long-term debt 717,592 669,442
----------- -----------
Total current liabilities 8,872,121 10,799,902
Long-term obligations:
Long-term debt 1,303,242 1,118,005
Pension liability 200,884 200,884
Deferred income taxes 1,211,507 1,211,507
Minority interest in consolidated subsidiary 1,017,214 1,019,311
----------- -----------
Total liabilities 12,604,968 14,349,609
----------- -----------
Stockholders' equity:
Common stock, $.02 par value; authorized 20,000,000
shares; issued and outstanding - 8,657,026
and 8,572,756 shares, respectively 173,141 171,455
Additional paid-in capital 31,071,509 30,510,061
Cumulative translation adjustments 6,900 (38,621)
Unearned portion of restricted stock issued (78,632) -
Retained earnings 24,333,675 19,912,649
----------- -----------
Total stockholders' equity 55,506,593 50,555,544
----------- -----------
$68,111,561 $64,905,153
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
-2-
<PAGE> 3
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Earnings
-----------------------------------
(Unaudited)
<CAPTION>
Thirteen Thirteen Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
July 29, 1995 July 30, 1994 July 29, 1995 July 30, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $23,376,827 $19,764,750 $63,326,317 $53,796,739
Cost of sales 15,429,499 13,075,123 42,047,685 36,142,355
----------- ----------- ----------- -----------
Gross margin 7,947,328 6,689,627 21,278,632 17,654,384
Selling, general and
administrative
expenses 4,918,519 4,127,542 13,490,816 11,392,275
----------- ----------- ----------- -----------
Operating profit 3,028,809 2,562,085 7,787,816 6,262,109
Interest income, net 45,663 27,465 119,780 117,554
Minority interest
in earnings of
consolidated
subsidiary (6,886) - (22,013) -
----------- ----------- ----------- -----------
Earnings before
income taxes 3,067,586 2,589,550 7,885,583 6,379,663
Income tax expense 1,150,500 958,300 2,947,160 2,360,900
----------- ----------- ----------- -----------
Net earnings $ 1,917,086 $ 1,631,250 $ 4,938,423 $ 4,018,763
=========== =========== =========== ===========
Primary net earnings
per share $.22 $.19 $.56 $.46
==== ==== ==== ====
See accompanying notes to consolidated financial statements.
</TABLE>
-3-
<PAGE> 4
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Stockholders' Equity
-----------------------------------------------
Thirty-Nine Weeks Ended July 29, 1995, and July 30, 1994
--------------------------------------------------------
(Unaudited)
<CAPTION>
Unearned
Additional Cumulative Portion Of Total
Common Paid-in Translation Restricted Retained Stockholders'
Stock Capital Adjustments Stock Issued Earnings Equity
-------- ----------- ----------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 30, 1993 $169,609 $29,935,758 $(78,819) $ - $14,120,654 $44,147,202
Net earnings - - - - 4,018,763 4,018,763
Cash dividends - - - - (255,620) (255,620)
Exercise of stock options 672 36,410 - - 37,082
Issuance of stock to Employee
Stock Purchase Plan 582 302,257 - - - 302,839
Compensation expense under
non-qualified stock options - 48,424 - - - 48,424
Translation adjustments
during year - - 20,940 - - 20,940
-------- ----------- -------- -------- ----------- -----------
Balance, July 30, 1994 $170,863 $30,322,849 $(57,879) $ - $17,883,797 $48,319,630
======== =========== ======== ======== =========== ===========
Balance, October 29, 1994 $171,455 $30,510,061 $(38,621) $ - $19,912,649 $50,555,544
Net earnings - - - - 4,938,423 4,938,423
Cash dividends - - - - (517,397) (517,397)
Exercise of stock options 873 58,671 - - - 59,544
Issuance of stock to Employee
Stock Purchase Plan 663 397,973 - - - 398,636
Compensation expense under
non-qualified stock options - 15,579 - - - 15,579
Translation adjustments
during year - - 45,521 - - 45,521
Issuance of restricted stock 150 89,225 - (89,225) - 150
Amortization of restricted
stock awards - - 10,593 - 10,593
-------- ----------- -------- -------- ----------- -----------
Balance, July 29, 1995 $173,141 $31,071,509 $ 6,900 $(78,632) $24,333,675 $55,506,593
======== =========== ======== ======== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
-4-
<PAGE> 5
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Cash Flows
-------------------------------------
(Unaudited)
<CAPTION>
Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
July 29, 1995 July 30, 1994
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 4,938,423 $ 4,018,763
----------- -----------
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation 1,487,910 1,171,560
Amortization of other assets 909,429 888,496
Translation adjustments during year 45,521 20,940
Compensation expense under non-qualified stock options 15,579 48,424
Minority interest in consolidated subsidiary 22,013 -
Amortization of restricted stock awards 10,593 -
Change in assets and liabilities:
Decrease (increase) in:
Accounts receivable, net 1,156,919 (250,172)
Inventories (2,238,632) (836,069)
Prepaid expenses and other current assets 45,469 29,337
Other assets, net (1,095,984) (721,520)
Increase (decrease) in:
Accounts payable (358,553) (254,328)
Accrued liabilities (1,617,378) (189,801)
----------- -----------
Total adjustments (1,617,114) (93,133)
----------- -----------
Net cash provided by operating activities 3,321,309 3,925,630
----------- -----------
Cash flows from investing activities:
Cost of business acquired (including working
capital of $897,235 at date of acquisition) - (3,403,196)
Additions to property, plant and equipment, net (3,331,343) (3,484,296)
----------- -----------
Net cash used in investing activities (3,331,343) (6,887,492)
----------- -----------
Cash flows from financing activities:
Borrowings (repayment) of long-term debt, net 233,387 (224,804)
Common stock issuances 458,330 339,921
Cash dividends (517,397) (255,620)
----------- -----------
Net cash provided by (used in)
financing activities 174,320 (140,503)
----------- -----------
Net increase (decrease) in cash and cash equivalents 164,286 (3,102,365)
Cash and cash equivalents-beginning of period 7,312,189 10,626,386
----------- -----------
Cash and cash equivalents-end of period $ 7,476,475 $ 7,524,021
=========== ===========
Supplemental Cash Flow Information:
Cash paid for interest $ 133,388 $ 43,360
=========== ===========
Cash paid for income taxes $ 3,798,902 $ 1,966,777
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
-5-
<PAGE> 6
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Notes to Consolidated Financial Statements
------------------------------------------
Thirteen Weeks Ended July 29, 1995
----------------------------------
Note 1. - Interim Results
The financial statements contained herein are unaudited. In the opinion
of management, these financial statements reflect all adjustments, consisting
only of normal recurring adjustments, which are necessary for fair
presentation of the results of the interim periods presented. Reference is
made to the footnotes to the consolidated financial statements contained in
the Company's Annual Report on Form 10-K for the year ended October 29,
1994, filed with the Securities and Exchange Commission.
Note 2. - Acquisitions
During September 1994, the Company acquired a 67% controlling interest
in Miton, a.s. ("Miton"), a furniture manufacturer in the Czech Republic,
pursuant to an agreement with the government of the Czech Republic. The total
cost to acquire the 67% interest in Miton was approximately $2.3 million and
was funded from the Company's available cash reserves. Under terms of the
purchase agreement, the Company will invest an additional $2.5 million in
Miton over the next five years to acquire equipment and make certain plant
improvements. This additional investment will increase the Company's
ownership interest in Miton to approximately 84%. The Company expects to fund
this additional investment from its available cash reserves, internally
generated funds and/or available borrowings under its credit facility.
On January 17, 1994, the Company acquired substantially all of the
assets and assumed certain liabilities of Charlotte Company, Inc.
("Charlotte") located in Belding, Michigan. Charlotte is an 82 year old
company that specializes in the production and distribution of high quality
wood and metal seating geared toward the office and upper end restaurant and
lodging applications. The total purchase price for this transaction was
approximately $3.4 million and was funded by the Company from its available
cash reserves.
Item 2. - Management's Discussion and Analysis of Results of Operations and
-----------------------------------------------------------------
Financial Condition
-------------------
RESULTS OF OPERATIONS
General
<TABLE>
The following table sets forth, for the periods presented, certain
information relating to the operations of the Company, expressed as a
percentage of net sales:
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
---------------------- -----------------------
07/29/95 07/30/94 07/29/95 07/30/94
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 66.0 66.2 66.4 67.2
Gross margin 34.0 33.8 33.6 32.8
Selling, general and administrative expenses 21.0 20.8 21.3 21.2
Operating profit 13.0 13.0 12.3 11.6
Interest income, net .1 .1 .2 .3
Minority interest in consolidated subsidiary - - - -
Earnings before income taxes 13.1 13.1 12.5 11.9
Income tax expense 4.9 4.8 4.7 4.4
Net earnings 8.2 8.3 7.8 7.5
</TABLE>
-6-
<PAGE> 7
Thirteen weeks ended July 29, 1995, compared to the thirteen weeks ended
July 30, 1994
Net earnings totaled $1,917,000 in the third quarter of 1995, compared to
$1,631,000 in 1994, an increase of 17.5%. Primary net earnings per share
reached $.22 in 1995, compared to $.19 in 1994, a 15.8% increase.
Net sales for the third quarter of 1995 were $23,377,000, an increase of
18.3% over 1994 third quarter net sales of $19,765,000. This increase
primarily resulted from strong sales performance from the Company's Flight
network of office furniture dealers, sales increases from the Company's
National Accounts program and incremental sales from the acquisition of Miton
during 1994. Net sales for the quarter excluding sales resulting from the
acquisition of Miton were approximately $22,283,000.
Cost of sales was $15,429,000 for the 1995 third quarter, an increase of
18.0% from $13,075,000 in the third quarter of 1994. The overall increase is
a result of the increased sales volume. Gross margin increased to $7,947,000
for the third quarter of 1995, a 18.8% increase from $6,690,000 in the same
quarter of 1994. Gross margin as a percentage of net sales increased to 34.0%
in 1995 from 33.8% in 1994. The higher gross margin percentage during the
third quarter of 1995 was due primarily to product mix and increased
utilization of manufacturing facilities.
Selling, general and administrative expenses were $4,919,000 in the third
quarter of 1995, compared to $4,128,000 in the third quarter of 1994, a 19.2%
increase. The overall increase is primarily related to higher sales volume.
Selling, general and administrative expenses as a percentage of net sales,
increased to 21.0% for the third quarter of 1995 as compared to 20.8% for the
same period of 1994. The increase in the expense rate in 1995 is primarily
the result of the Company's investment in sales and marketing programs,
including salaries, travel expenses and commissions.
Net interest income was $46,000 for the third quarter of 1995, versus
$27,000 for the comparable period in 1994. The increase in net interest
income is primarily due to higher returns on the available funds invested in
interest-bearing securities, offset by incremental interest expense associated
with the borrowings of Miton.
Income tax expense increased by $192,000, or 20.1%, in the third quarter of
1995 compared to the same period in 1994 due to higher earnings and a slightly
higher effective tax rate in 1995.
Thirty-nine weeks ended July 29, 1995, compared to thirty-nine weeks ended
July 30, 1994
Net earnings totaled $4,938,000 in the first three quarters of 1995,
compared to $4,019,000 in 1994, an increase of 22.9%. Primary net earnings
per share reached $.56 in 1995, compared to $.46 in 1994, a 21.7% increase.
Net sales for the first three quarters of 1995 were $63,326,000, an increase
of 17.7% over net sales of $53,797,000 recorded for the same period in 1994.
Net sales increased primarily due to increased sales from the Company's
National Accounts program and the Company's flight network of office
furniture dealers and incremental sales from the acquisitions of Charlotte and
Miton during 1994. Net sales excluding sales resulting from these two
acquisitions were approximately $56,479,000 in 1995 and $50,730,000 in 1994.
Cost of sales was $42,048,000 for the first three quarters of 1995, an
increase of 16.3% from $36,142,000 in the first three quarters of 1994. The
overall increase is primarily related to the increased sales volume. Gross
margin increased to $21,279,000 for the first three quarters of 1995, a 20.5%
increase from $17,654,000 in the same period of 1994. Gross margin as a
percentage of net sales increased to 33.6% in 1995 from 32.8% in 1994. The
higher gross margin percentage during the first three quarters of 1995 was due
primarily to product mix and increased utilization of manufacturing
facilities.
-7-
<PAGE> 8
Selling, general and administrative expenses were $13,491,000 in the first
three quarters of 1995, compared to $11,392,000 in 1994, an 18.4% increase.
The overall increase is primarily related to higher sales volume. Selling,
general and administrative expenses as a percentage of net sales remained
relatively constant, increasing to 21.3% for the first three quarters of 1995
as compared to 21.2% for the same period of 1994.
Net interest income was $120,000 for the first three quarters of 1995,
versus $118,000 for the comparable period in 1994. The increase in net
interest income is primarily due to higher returns on the available funds
invested in interest-bearing securities, offset by incremental interest
expense associated with the borrowings of Miton.
Income tax expense was $2,947,000 for the first three quarters of 1995, a
24.8% increase compared to $2,361,000 for the same period in 1994. Income tax
expense increased in 1995 due to higher earnings and a slightly higher
effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at July 29, 1995, was $28,762,000 and its
ratio of current assets to current liabilities was 4.2 to 1.0, compared to
$25,658,000 and 3.4 to 1.0 at October 29, 1994.
Capital expenditures by the Company during the first three quarters of 1995
and 1994 were $3.3 million and $3.5 million, respectively. The Company's
capital budget for the remainder of 1995 is approximately $1.2 million, which
is expected to be funded by internally generated funds and/or available cash
reserves.
The Company has a $2 million unsecured revolving line of credit agreement
with a commercial bank. The revolving line of credit bears interest at the
London Interbank Offered Rate plus 1.25 percent and expires on July 1, 1997.
As of July 29, 1995, there were no amounts outstanding under the revolving
line of credit.
The Company expects that it will meet its ongoing working capital and
capital requirements from a combination of internally generated funds,
available cash reserves and available borrowings under its revolving credit
facility. The Company's operating cash flows constitute its primary internal
source of liquidity.
-8-
<PAGE> 9
PART II - OTHER INFORMATION
-----------------
Item 1. - Legal Proceedings
-----------------
There are no material pending legal proceedings, other than
routine litigation incidental to the business, to which the
Company is a party or of which any of the Company's property
is the subject.
Item 2. - Changes in Securities
---------------------
None.
Item 3. - Defaults Upon Senior Securities
-------------------------------
None.
Item 4. - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5. - Other Information
-----------------
None.
Item 6. - Exhibits and Reports on Form 8-K
--------------------------------
(a) For exhibits, see exhibit index on page 11.
(b) No current Reports on Form 8-K have been filed during
the thirteen weeks ended July 29, 1995.
-9-
<PAGE> 10
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FALCON PRODUCTS, INC.
---------------------
(Registrant)
Date: September 7, 1995 /s/ Franklin A. Jacobs
--------------------------------
Franklin A. Jacobs
President, Chief Executive Officer,
and Chairman of the Board
Date: September 7, 1995 /s/ Stephen L. Clanton
--------------------------------
Stephen L. Clanton
Executive Vice President,
Chief Financial Officer
-10-
<PAGE> 11
<TABLE>
EXHIBIT INDEX
--------------
<CAPTION>
Exhibit
Number Description Page
- ------- ----------- ----
<C> <S> <C>
11 Computation of net earnings
per share, filed herewith. 12
</TABLE>
-11-
<PAGE> 1
EXHIBIT NO. 11
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
COMPUTATION OF NET EARNINGS PER SHARE
(Unaudited)
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
--------------------------- -------------------------
July 29, July 30, July 29, July 30,
Primary Earnings Per Share: 1995 1994 1995 1994
- --------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net earnings $1,917,086 $1,631,250 $4,938,423 $4,018,763
========== ========== ========== ==========
Average number of common shares
outstanding 8,647,283 8,524,533 8,616,557 8,504,413
Assumed exercise of options
(treasury stock method) 231,891 210,698 213,563 214,057
---------- ---------- ---------- ----------
Shares for primary
computation 8,879,174 8,735,231 8,830,120 8,718,470
========== ========== ========== ==========
Net earnings per share $.22 $.19 $.56 $.46
==== ==== ==== ====
Fully Diluted Earnings Per Share:
- ---------------------------------
Net earnings $1,917,086 $1,631,250 $4,938,423 $4,018,763
========== ========== ========== ==========
Average number of common shares
outstanding 8,647,283 8,524,533 8,616,557 8,504,413
Assumed exercise of options
(treasury stock method) 246,176 215,464 246,176 215,464
---------- ---------- ---------- ----------
Shares for fully diluted
computation 8,893,459 8,739,997 8,862,733 8,719,877
========== ========== ========== ==========
Net earnings per share $.22 $.19 $.56 $.46
==== ==== ==== ====
</TABLE>
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-Q FOR THE QUARTERLY PERIOD ENDED JULY 29, 1995, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-28-1995
<PERIOD-END> JUL-29-1995
<CASH> 7476475
<SECURITIES> 0
<RECEIVABLES> 13161531
<ALLOWANCES> 360000
<INVENTORY> 15594659
<CURRENT-ASSETS> 37634022
<PP&E> 34205492
<DEPRECIATION> 13245471
<TOTAL-ASSETS> 68111561
<CURRENT-LIABILITIES> 8872121
<BONDS> 0
<COMMON> 173141
0
0
<OTHER-SE> 55333452
<TOTAL-LIABILITY-AND-EQUITY> 68111561
<SALES> 63326317
<TOTAL-REVENUES> 63326317
<CGS> 42047685
<TOTAL-COSTS> 42047685
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (119780)
<INCOME-PRETAX> 7885583
<INCOME-TAX> 2947160
<INCOME-CONTINUING> 4938423
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4938423
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
</TABLE>
