<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 April 29, 1995
OR
[ ] TRANSACTION 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 63132
ST. LOUIS, MISSOURI (Zip Code)
(Address of principal executive offices)
(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 June 1, 1995, the registrant had 8,642,659 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>
April 29, October 29,
1995 1994
----------- -----------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 6,927,451 $ 7,312,189
Accounts receivable, less allowances
of $322,000 and $503,000, respectively 11,379,571 14,318,450
Inventories 15,605,179 13,380,137
Prepaid expenses and other current assets 1,370,435 1,446,826
----------- -----------
Total current assets 35,282,636 36,457,602
----------- -----------
Property, plant and equipment:
Land 2,799,225 1,942,124
Buildings and improvements 11,454,767 10,404,634
Machinery and equipment 19,280,822 18,865,549
----------- -----------
33,534,814 31,212,307
Less accumulated depreciation 12,763,757 12,095,719
----------- -----------
Total property, plant and equipment 20,771,057 19,116,588
----------- -----------
Other assets, net of accumulated amortization:
Excess of cost over fair value of net assets acquired 6,751,480 6,878,260
Other 2,835,001 2,452,703
----------- -----------
Total other assets 9,586,481 9,330,963
----------- -----------
$65,640,174 $64,905,153
=========== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 5,013,248 $ 5,395,549
Accrued liabilities 3,032,954 4,734,911
Current maturities of long-term debt 151,215 669,442
----------- -----------
Total current liabilities 8,197,417 10,799,902
Long-term obligations:
Long-term debt 1,289,661 1,118,005
Pension liability 200,884 200,884
Deferred income taxes 1,211,507 1,211,507
Minority interest in consolidated subsidiary 1,034,438 1,019,311
----------- -----------
Total liabilities 11,933,907 14,349,609
----------- -----------
Stockholders' equity:
Common stock, $.02 par value; authorized 20,000,000
shares; issued and outstanding - 8,642,659
and 8,572,756 shares, respectively 172,853 171,455
Additional paid-in capital 30,891,577 30,510,061
Cumulative translation adjustments 104,843 (38,621)
Unearned portion of restricted stock issued (52,617) -
Retained earnings 22,589,611 19,912,649
----------- -----------
Total stockholders' equity 53,706,267 50,555,544
----------- -----------
$65,640,174 $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 Twenty-Six Twenty-Six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
April 29, 1995 April 30, 1994 April 29, 1995 April 30, 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales $21,129,459 $18,765,722 $39,949,490 $34,031,989
Cost of sales 13,623,292 12,517,161 26,618,186 23,067,232
----------- ----------- ----------- -----------
Gross margin 7,506,167 6,248,561 13,331,304 10,964,757
Selling, general and
administrative
expenses 4,751,416 3,985,111 8,572,297 7,264,733
----------- ----------- ----------- -----------
Operating profit 2,754,751 2,263,450 4,759,007 3,700,024
Interest income, net 37,594 40,896 74,117 90,089
Minority interest in
earnings of consoli-
dated subsidiary (4,375) - (15,127) -
----------- ----------- ----------- -----------
Earnings before
income taxes 2,787,970 2,304,346 4,817,997 3,790,113
Income tax expense 1,045,370 852,700 1,796,660 1,402,600
----------- ----------- ----------- -----------
Net earnings $ 1,742,600 $ 1,451,646 $ 3,021,337 $ 2,387,513
=========== =========== =========== ===========
Primary net earnings
per share $.20 $.17 $.34 $.27
==== ==== ==== ====
See accompanying notes to consolidated financial statements.
</TABLE>
-3-
<PAGE> 4
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Stockholders' Equity
-----------------------------------------------
Twenty-Six Weeks Ended April 29, 1995, and April 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 - - - - 2,387,513 2,387,513
Cash dividends - - - - (127,561) (127,561)
Exercise of stock options 334 31,009 - - - 31,343
Issuance of stock to Employee
Stock Purchase Plan 365 190,085 - - - 190,450
Compensation expense under
non-qualified stock options - 36,318 - - - 36,318
Translation adjustments
during year - - (38,243) - - (38,243)
-------- ----------- --------- -------- ----------- -----------
Balance, April 30, 1994 $170,308 $30,193,170 $(117,062) $ - $16,380,606 $46,627,022
======== =========== ========= ======== =========== ===========
Balance, October 29, 1994 $171,455 $30,510,061 $ (38,621) $ - $19,912,649 $50,555,544
Net earnings - - - - 3,021,337 3,021,337
Cash dividends - - - (344,375) (344,375)
Exercise of stock options 859 57,201 - - - 58,060
Issuance of stock to Employee
Stock Purchase Plan 439 256,529 - - - 256,968
Compensation expense under
non-qualified stock options - 10,386 - - - 10,386
Translation adjustments
during year - - 143,464 - - 143,464
Issuance of restricted stock 100 57,400 - (57,400) - 100
Amortization of restricted
stock awards - - - 4,783 - 4,783
-------- ----------- --------- -------- ----------- -----------
Balance, April 29, 1995 $172,853 $30,891,577 $ 104,843 $(52,617) $22,589,611 $53,706,267
======== =========== ========= ======== =========== ===========
See accompanying notes to consolidated financial statements
</TABLE>
-4-
<PAGE> 5
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Cash Flows
-------------------------------------
(Unaudited)
<CAPTION>
Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
April 29, 1995 April 30, 1994
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,021,337 $ 2,387,513
----------- -----------
Adjustments to reconcile net earnings
to net cash provided by operating activities
Depreciation 979,035 758,831
Amortization of other assets 574,077 557,887
Translation adjustments during year 143,464 (38,243)
Compensation expense under non-qualified stock options 10,386 36,318
Minority interest in consolidated subsidiary 15,127 -
Amortization of restricted stock awards 4,783 -
Change in assets and liabilities:
Decrease (increase) in:
Accounts receivable, net 2,938,879 411,897
Inventories (2,225,042) (737,536)
Prepaid expenses and other current assets 76,391 (230,132)
Other assets, net (829,595) (368,102)
Increase (decrease) in:
Accounts payable (382,301) (461,477)
Accrued liabilities (1,701,957) (531,069)
----------- -----------
Total adjustments (396,753) (601,626)
----------- -----------
Net cash provided by operating activities 2,624,584 1,785,887
----------- -----------
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 (2,633,504) (1,910,927)
----------- -----------
Net cash used in investing activities (2,633,504) (5,314,123)
----------- -----------
Cash flows from financing activities:
Repayment of long-term debt, net (346,571) (212,655)
Common stock issuances 315,128 221,793
Cash dividends (344,375) (127,561)
----------- -----------
Net cash used in financing activities (375,818) (118,423)
----------- -----------
Net decrease in cash and cash equivalents (384,738) (3,646,659)
Cash and cash equivalents-beginning of period 7,312,189 10,626,386
----------- -----------
Cash and cash equivalents-end of period $ 6,927,451 $ 6,979,727
============ ===========
Supplemental Cash Flow Information:
Cash paid for interest $ 100,999 $ 38,974
============ ===========
Cash paid for income taxes $ 2,480,700 $ 994,551
============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
-5-
<PAGE> 6
Falcon Products, Inc. and Subsidiaries
---------------------------------------
Notes to Consolidated Financial Statements
------------------------------------------
Thirteen Weeks Ended April 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 cash 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
<TABLE>
General
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 Twenty-Six Weeks Ended
---------------------- ----------------------
04/29/95 04/30/94 04/29/95 04/30/94
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales 100% 100.0% 100% 100.0%
Cost of sales 64.5 66.7 66.6 67.8
Gross margin 35.5 33.3 33.4 32.2
Selling, general and administrative expenses 22.5 21.2 21.5 21.3
Operating profit 13.0 12.1 11.9 10.9
Interest income, net .2 .2 .2 .2
Minority interest in consolidated subsidiary - - - -
Earnings before income taxes 13.2 12.3 12.1 11.1
Income tax expense 5.0 4.6 4.5 4.1
Net earnings 8.2 7.7 7.6 7.0
</TABLE>
-6-
<PAGE> 7
Thirteen weeks ended April 29, 1995, compared to the thirteen weeks ended
April 30, 1994
Net earnings totaled $1,743,000 in the second quarter of 1995, compared to
$1,452,000 in 1994, an increase of 20.0%. Primary net earnings per share
reached $.20 in 1995, compared to $.17 in 1994, a 17.6% increase.
Net sales for the second quarter of 1995 were $21,129,000, an increase of
12.6% over 1994 second quarter net sales of $18,766,000. This increase
primarily resulted from strong sales performance from the Company's Flight
network of office furniture dealers, sales increases through international
distribution channels 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 $20,100,000.
Cost of sales was $13,623,000 for the 1995 second quarter, an increase of
8.8% from $12,517,000 in the second quarter of 1994. The overall increase is
a result of the increased sales volume. Gross margin increased to $7,506,000
for the second quarter of 1995, a 20.1% increase from $6,249,000 in the same
quarter of 1994. Gross margin as a percentage of net sales increased to
35.5% in 1995 from 33.3% in 1994. The higher gross margin percentage during
the second quarter of 1995 was due primarily to product mix and increased
utilization of manufacturing facilities.
Selling, general and administrative expenses were $4,751,000 in the second
quarter of 1995, compared to $3,985,000 in the second 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 22.5% for the second quarter of 1995 as compared to 21.2%
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 $38,000 for the second quarter of 1995, versus
$41,000 for the comparable period in 1994. The decrease in net interest
income is primarly due to the reduction of available funds invested in
interest-bearing securities due to the acquisition of Miton during 1994 and
due to incremental interest expense associated with the borrowings of Miton.
Income tax expense increased by $193,000, or 22.6%, in the second quarter of
1995 compared to the same period in 1994 due to higher earnings and a
slightly higher effective tax rate in 1995.
Twenty-six weeks ended April 29, 1995, compared to twenty-six weeks ended
April 30, 1994
Net earnings totaled $3,021,000 in the first half of 1995, compared to
$2,388,000 in 1994, an increase of 26.5%. Primary net earnings per share
reached $.34 in 1995, compared to $.27 in 1994, a 25.9% increase.
Net sales for the first half of 1995 were $39,949,000, an increase of 17.4%
over net sales of $34,032,000 recorded for the same period in 1994. Net
sales increased primarily due to increased sales from the Company's National
Accounts program and due to the acquisitions of Charlotte and Miton during
1994. Net sales excluding sales resulting from these two acquisitions were
approximately $35,500,000 in 1995 and $32,100,000 in 1994.
Cost of sales was $26,618,000 for the first half of 1995, an increase of
15.4% from $23,067,000 in the first half of 1994. The overall increase is
primarily related to the increased sales volume. Gross margin increased to
$13,331,000 for the first half of 1995, a 21.6% increase from $10,965,000 in
the same period of 1994. Gross margin as a percentage of net sales increased
to 33.4% in 1995 from 32.2% in 1994. The higher gross margin percentage
during the first half of 1995 was due primarily to product mix and increased
utilization of manufacturing facilities.
-7-
<PAGE> 8
Selling, general and administrative expenses were $8,572,000 in the first
half of 1995, compared to $7,265,000 in 1994, an 18.0% 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 21.5% for the first half of 1995 as compared to 21.3%
for the same period of 1994.
Net interest income was $74,000 for the first half of 1995, versus $90,000
for the comparable period in 1994. The decrease in net interest income is
primarily due to the reduction of available funds invested in interest-
bearing securities due to the acquisitions of Charlotte and Miton during 1994
and due to incremental interest expense associated with the borrowings of
Miton.
Income tax expense was $1,797,000 for the first half of 1995, a 28.1%
increase compared to $1,403,000 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 April 29, 1995, was $27,085,000 and its
ratio of current assets to current liabilities was 4.3 to 1.0, compared to
$25,658,000 and 3.4 to 1.0 at October 29, 1994.
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 1.75 percent and expires on July 1, 1996.
As of April 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 source
of liquidity.
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.
-8-
<PAGE> 9
<TABLE>
Item 4. - Submission of Matters to a Vote of Security Holders
----------------------------------------------------
The Company held its Annual Meeting of Stockholders on March 16,
1995, for the purpose of electing a board of nine directors, to
vote on the approval of an amendment to the Company's Amended and
Restated 1991 Stock Option Plan to increase the number of shares
available for issuance under the Plan from 600,000 to 1,000,000 and
to vote on the amendment of the Company's Certificate of
Incorporation to increase the number of authorized shares of common
stock from ten million to twenty million. The number of votes in
favor, votes withheld and votes abstained for each nominee for
director, as well as the number of votes for, against and abstained
for the proposals to amend the Company's Amended and Restated 1991
Stock Option Plan and to amend the Company's Certificate of
Incorporation are as follows:
<CAPTION>
Nominee Votes For Votes Withheld Votes Abstained
-------- --------- -------------- ---------------
<S> <C> <C> <C>
Raynor E. Baldwin 7,252,178 4,625 38,015
Donald P. Gallop 7,071,817 184,986 38,015
Franklin E. Hancock 7,249,058 7,745 38,015
James L. Hoagland 7,253,067 3,736 38,015
Franklin A. Jacobs 7,255,567 1,236 38,015
S. Lee Kling 7,254,167 2,636 38,015
Lee M. Liberman 7,252,167 4,636 38,015
Alan Peters 7,074,717 182,086 38,015
James Schneider 7,255,367 1,436 38,015
<CAPTION>
Votes For Votes Against Votes Abstained
--------- ------------- ----------------
<S> <C> <C> <C>
Approval of the amendment
to the Company's Amended
and Restated 1991 Stock
Option Plan 6,727,217 538,984 28,617
Amendment to the Company's
Certificate of Incorporation 7,110,654 162,611 21,553
</TABLE>
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 April 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: June 1, 1995 /s/ Franklin A. Jacobs
------------------------------------
Franklin A. Jacobs
President, Chief Executive Officer,
and Chairman of the Board
Date: June 1, 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
<TABLE>
EXHIBIT NO. 11
Falcon Products, Inc. and Subsidiaries
---------------------------------------
COMPUTATION OF NET EARNINGS PER SHARE
(Unaudited)
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
------------------------ ------------------------
April 29, April 30, April 29, April 30,
Primary Earnings Per Share: 1995 1994 1995 1994
- --------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net earnings $1,742,600 $1,451,646 $3,021,337 $2,387,513
========== ========== ========== ==========
Average number of common shares outstanding 8,621,038 8,502,708 8,601,194 8,494,354
Assumed exercise of options (treasury stock method) 212,000 230,635 200,316 231,144
---------- ---------- ---------- ----------
Shares for primary computation 8,833,038 8,733,343 8,801,510 8,725,498
========== ========== ========== ==========
Net earnings per share $.20 $.17 $.34 $.27
==== ==== ==== ====
Fully Diluted Earnings Per Share:
- ---------------------------------
Net earnings $1,742,600 $1,451,646 $3,021,337 $2,387,513
========== ========== ========== ==========
Average number of common shares outstanding 8,621,038 8,502,708 8,601,194 8,494,354
Assumed exercise of options (treasury stock method) 212,000 230,635 200,316 231,144
---------- ---------- ---------- ----------
Shares for fully diluted computation 8,833,038 8,733,343 8,801,510 8,725,498
========== ========== ========== ==========
Net earnings per share $.20 $.17 $.34 $.27
==== ==== ==== ====
</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 APRIL 29, 1995, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-28-1995
<PERIOD-END> APR-29-1995
<CASH> 6,927,451
<SECURITIES> 0
<RECEIVABLES> 11,701,571
<ALLOWANCES> 322,000
<INVENTORY> 15,605,179
<CURRENT-ASSETS> 35,282,636
<PP&E> 33,534,814
<DEPRECIATION> 12,763,757
<TOTAL-ASSETS> 65,640,174
<CURRENT-LIABILITIES> 8,197,417
<BONDS> 0
<COMMON> 172,853
0
0
<OTHER-SE> 53,533,414
<TOTAL-LIABILITY-AND-EQUITY> 65,640,174
<SALES> 39,949,490
<TOTAL-REVENUES> 39,949,490
<CGS> 26,618,186
<TOTAL-COSTS> 26,618,186
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (74,117)
<INCOME-PRETAX> 4,817,997
<INCOME-TAX> 1,796,660
<INCOME-CONTINUING> 3,021,337
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,021,337
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
