<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED OCTOBER 28, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ----- TO -----
COMMISSION FILE NUMBER 1-11577
------------------------
FALCON PRODUCTS, INC.
DELAWARE 43-0730877
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9387 DIELMAN INDUSTRIAL DRIVE, ST. LOUIS, MISSOURI 63132
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (314) 991-9200
--------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
COMMON STOCK, PAR VALUE $.02 PER SHARE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
--------------------------------
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 12 months (or for such
shorter period that the Registrant was required to file such
reports); and (2) has been subject to such filing requirements for
the past 90 days: Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of the Registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K:
[X]
The aggregate market value of the shares of Common Stock held by
nonaffiliates of the Registrant as of January 15, 1996, was
$83,373,427, based upon the average stock price as reported on the
New York Stock Exchange on such date.
As of January 15, 1996, the Registrant had outstanding 9,543,690
shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Part III: The definitive proxy statement of Registrant (to be
filed pursuant to Regulation 14A) for Registrant's 1996 Annual
Meeting of Shareholders, which involves the election of directors, is
incorporated by reference into Items 10, 11, 12 and 13.
Exhibit Index is on Pages 33 through 35 of this Report
Page 1 of 38 Pages
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<C> <S> <C>
PART I
- - ------
ITEM 1. Business 3
ITEM 2. Properties 8
ITEM 3. Legal Proceedings 9
ITEM 4. Submission of Matters to a Vote of Security Holders 9
ITEM 4A. Executive Officers of the Registrant 9
PART II
- - -------
ITEM 5. Market for the Registrant's Common Equity and
Related Stockholder Matters 10
ITEM 6. Selected Financial Data 11
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
ITEM 8. Financial Statements and Supplementary Data 15
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 29
PART III
- - --------
ITEM 10. Directors and Executive Officers of the Registrant 29
ITEM 11. Executive and Director Compensation 29
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management 29
ITEM 13. Certain Relationships and Related Transactions 29
PART IV
- - -------
ITEM 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 29
SIGNATURES 32
- - ----------
EXHIBIT INDEX 33
- - -------------
</TABLE>
2
<PAGE> 3
FALCON PRODUCTS, INC.
FORM 10-K
When used herein, the term "Company" refers to the Registrant, Falcon
Products, Inc., and its subsidiaries.
PART I
ITEM 1. BUSINESS.
GENERAL
The Company designs, manufactures and markets an extensive line of
furniture and related products for the foodservice, office and lodging
industries, including table bases, table tops, metal and wood chairs, booths,
interior decor systems and wire shelving. The Company manufactures most of
its products to customer order from basic raw materials. The Company markets
its products to a wide variety of customers, including wholesale
distributors, buying groups, architectural design firms, office furniture
dealers and end users, through a combination of its own direct factory sales
force and independent manufacturer's representatives.
PRODUCTS
Furniture Products. The Company's principal products consist of table
bases, table tops, wood and metal chairs and booths. The Company's table
bases are produced in a variety of sizes, styles and finishes and are
utilized by restaurants, hotels, offices, employee cafeterias, healthcare
facilities, airports, universities and other commercial locations where food
is served. Table bases are finished to order in one of the Company's 42
standard catalog powder coat paint finishes or seven designer plated
finishes and also may be painted to match a customer's custom finish
requirements. Table bases either may be combined with table tops produced by
the Company to create complete tables for sale to customers or may be used by
a customer in connection with other table tops. The Company also has a
number of original equipment manufacturer customers who purchase its table
bases for use with their own table tops.
Table tops are manufactured by the Company in a number of standard sizes
and shapes and in a variety of finishes, including wood veneers, fiberglass,
high-pressure laminate patterns and solid wood. Edge treatments for the
table tops are available in vinyl, laminate, wood or metal. Wood edges are
machined to one of 26 standard catalog edge treatments on machinery
especially designed for the production of custom contract quality products.
Wood edge, veneer and butcher block tops are stained with one of the
Company's 36 standard color finishes and sealed and sprayed with a durable
catalyzed top coat. The Company also has the capability of manufacturing
custom table tops in a wide variety of customer-specified sizes, shapes and
finishes. Table tops are typically sold with a base produced by the Company
but may be purchased separately.
The Company produces wood chairs in many styles from a variety of wood
types and in many standard upholstery fabric and vinyl coverings. The
majority of these chairs are assembled from machined parts purchased in
Europe. For upholstered products, the customer may select one of the
Company's 91 standard catalog vinyls or 205 contract-quality fabrics or may
specify or supply its choice of materials. Wood chairs are finished with one
of the Company's 26 standard colors or the customer may specify or supply its
choice of finish material. A durable seal coat and top coat finish are also
applied to all wood chairs.
The Company's metal stacking chairs are available in a wide variety of
styles and are used primarily in multi-use room situations where it is
necessary to store the chairs for certain functions, such as in training and
banquet facilities. Metal chairs may be upholstered in one of the Company's
standard catalog vinyls or fabrics or in customer-furnished or
customer-specified materials and may be plated or powder coat painted in one
of 59 standard catalog finishes or in a customer-designated custom finish.
Booths manufactured by the Company are available in 29 standard catalog
styles and numerous customer-specified styles, and may be upholstered in one
of the Company's standard catalog vinyls or fabrics or in customer-designated
or supplied coverings. Exposed wood is color matched to customer
specifications and top coated with the same durable catalyzed finish used on
the Company's table tops and other wood products. Custom booths may also be
produced to customer specifications.
3
<PAGE> 4
The combination of the Company's broad line of furniture products and its
vertical manufacturing capabilities enable it to offer a complete commercial
interior decor package to its customers. The Company integrates certain of
its products into its Genesis interior decor system, including all furniture,
booths, walls, wood trim and casegoods components. Genesis casegoods
components include counters, bars, divider walls, planter units, salad bars
and stands produced in a variety of high-pressure laminates. Genesis
casegoods are manufactured by the Company, delivered to the customer site and
installed by employees or Company-trained subcontractors. The Genesis system
is suitable for either new foodservice installations or remodeling existing
facilities.
Wire Shelving and Kitchen Equipment. The Company's wire shelving systems
are manufactured by the Company's William Hodges division for use in the
foodservice industry for the storage of food products, including in-freezer
storage of perishable foods. These shelving systems are comprised of steel
wire, which forms the horizontal surface of the shelf, steel strips, which
form the perimeter of the shelf, steel posts, which support the shelf, and
plastic supports, which affix the shelf to the posts, and are available in
zinc, chrome and epoxy finishes. During 1994, the Company introduced its
durable new SilverShield epoxy finish on its wire shelving. This finish is
backed by a 15-year guarantee, the longest in the industry. Wire shelving is
also produced in stainless steel for use in extremely harsh environments.
Among the other items of metal kitchen equipment produced by the Company are
fry baskets, strainers and whips.
MARKETING AND DISTRIBUTION
Domestic Sales of Furniture and Wire Shelving Products. The Company sells
its furniture products throughout the United States to a wide variety of
customers, including restaurant supply dealers, architectural design firms,
office furniture dealers, mass merchandisers, OEM's and chain restaurants.
These products are marketed through a combination of 26 direct factory sales
representatives employed by the Company and 14 independent manufacturer's
representatives organizations. Most sales representatives are assigned to
geographical territories. The efforts of these factory and independent sales
representatives are directed by the Company's Senior Vice President-Sales,
three regional managers, three district managers and the Company's Flight
sales manager.
The Company's William Hodges division sells its product to the foodservice,
healthcare and material handling markets throughout the United States through
55 independent manufacturer's representatives organizations which are
directed by the Company's Senior Vice President-Sales and three regional
managers.
Each factory and independent sales representative (i) is assigned a
territory in which to promote and sell the Company's products, (ii) assists
in the collection of receivables and resolution of any complaints with regard
to his or her sales, and (iii) receives commissions based on the net sales
made in his or her territory. The Company determines the prices at which its
products will be sold and may refuse to accept any orders submitted by a
sales representative for credit-worthiness or other reasons. The Company's
independent sales representatives do not carry competing lines.
The Company's marketing programs assist its representatives in various
ways. The Company (i) conducts extensive training programs to better educate
its sales representatives with respect to the design, manufacture, variety
and decor applications of the Company's products, (ii) provides restaurant
supply and office furniture dealers, mass merchandisers, architectural
designers, OEM's and other customers with catalog materials, samples and
brochures, (iii) maintains a 33-person customer service department that
ensures that the Company promptly responds to the needs and orders of its
customers, (iv) exhibits its products at national and regional furniture
shows and leases a showroom in the Merchandise Mart in Chicago, (v) maintains
regular contact with key customers, and (vi) conducts ongoing surveys to
determine customer satisfaction.
Flight. The Company's office and other furniture products are also
marketed through the Company's "Flight" network of approximately 430
independent office furniture dealers and 590 secondary dealers. Flight
dealers distribute the Company's furniture products to a wide variety of
commercial users and office furniture retailers and provide the Company with
access to incremental sales opportunities. The Flight network is designed to
both distribute the Company's office furniture products and cross-sell its
foodservice furniture products. The Company utilizes its direct factory
sales force and independent sales representatives, under the supervision of
the Company's Flight sales manager, to call upon existing and prospective
Flight dealers.
4
<PAGE> 5
International Sales. The Company's products are marketed throughout Europe
through a network of approximately 66 dealers located in approximately 25
countries. The Company acquired Falcon Mimon, a.s. , formerly Miton, a.s., a
furniture manufacturer located in Mimon, Czech Republic ("Falcon Mimon") in
September 1994. Management believes that the manufacturing capabilities of
Falcon Mimon will complement the distribution network and will position the
Company to take advantage of opportunities in Europe. During 1995, the
Company began to close down its Paris sales and distribution offices because
it was not meeting the Company's financial expectations. To insure that the
Company's relationship with its customers that had been established by its
Paris office did not experience any disruption in service, additional
independent representatives were enlisted to support this effort.
Distribution of the Company's products in Asia and the Pacific Rim is
achieved through exclusive distribution arrangements in Japan and in Hong
Kong. The Company plans to augment these existing distribution agreements
during 1996 with additional distribution arrangements in South Korea and
other countries in the Pacific Rim. The Company's international sales
efforts are supported by two dedicated customer service personnel. During
1995, 1994 and 1993, foreign operations and export sales were $9.7 million,
$4.8 million, and $3.5 million, respectively. Of these amounts, $4.0 million
and $.4 million of sales in 1995 and 1994, respectively, were made directly
from the Company's Mimon location.
National Accounts. The Company's National Accounts program targets the
major restaurant chains in the United States. The Company's National
Accounts sales force consists of 11 employee sales representatives that are
directed by the Company's Vice President-National Accounts. The Company
believes that its vertically integrated manufacturing capabilities allow it
to better serve these customers than most of its competitors and that its
Genesis system is particularly suited for many of these customers. Each of
the National Accounts sales representatives is trained to assist the customer
in developing the design of a Genesis package to meet the customer's
requirements. The Company's National Accounts sales force is supported by 12
customer service representatives, 16 quotation and design services personnel
and eight product engineers, located at the Company's Newport, Tennessee and
Arcadia, California manufacturing facilities.
PRODUCT DESIGN AND DEVELOPMENT
The Company's design and engineering group consists of three designers and
four engineers. The designers work primarily with sales and marketing
personnel in support of the Company's Genesis systems for its National
Accounts program. The Company's engineering staff utilizes the Company's
computer aided design system to provide layout and configuration advice to
customers who are integrating the Company's furniture products into their
facilities and to design casegoods and other components. The design and
engineering group also assists the Company's product design engineers in the
development of new products.
The Company's Product Development team, which is comprised of purchasing,
engineering, marketing and financial personnel, strives to produce customer
satisfaction and competitively priced products by constantly improving the
Company's product lines. The Product Development team has a formalized
charter and a plan that not only will account for new product introductions,
but has identified market trends and includes product development to
accommodate those trends. The Company has three full-time product design
engineers who report to the Product Development team and are responsible for
the design of new product introductions. Product designs are also purchased
from time to time from outside sources to supplement the Company's internal
design capabilities.
MANUFACTURING
The Company's manufacturing facility in Newport, Tennessee, produces table
bases, table tops, millwork, casegoods and booths. Table bases are produced
from wood or from iron castings. Metal table bases are sent to the Newport
facility in truck load quantities from the Company's gray iron foundry in
Juarez, Mexico, and are finished to meet customer requirements. Table tops,
which may be combined with the Company's table bases to produce a complete
table, are produced from solid wood or 1 1/8" particle board core with a
laminate or wood veneer surface, receive various edge treatments and
finishes, and are sealed and sprayed with a durable top coat. Millwork and
casegoods, which are produced primarily to support the Genesis program, are
manufactured at the Newport facility from lumber that is purchased in truck
load quantities, dry-kilned and rough-planed. The lumber is then planed to a
finish dimension, cut to the appropriate length and width and profiled with
special edge treatments. The product is then assembled to engineering
specifications and finished with a durable catalyzed finish. Booths are
produced from rough lumber that is cut and prepared in a millroom at the
facility, covered or color-matched to customer specifications and top coated
with the same durable catalyzed finish used on the Company's table tops and
other wood products.
5
<PAGE> 6
The Company's facility in Lewisville, Arkansas, produces wood chairs.
Approximately 20% of the facility's wood chairs are produced entirely in
house, with the balance assembled from machined parts imported from Europe.
The Company purchases these parts in container loads and then assembles and
finishes the chairs to customer order. To provide consistency and speed to
the finishing process, a conveyorized paint line is utilized with spray
booths and drying ovens positioned to allow proper flash off and curing times
between finishing steps. Upon completion, chairs are cartoned to prevent
damage in transportation.
The Company's facility in Juarez, Mexico, produces iron castings which are
finished into table bases at the Newport facility. Molds for the table bases
are produced by packing sand around an aluminum match plate. Many of the raw
materials used at the facility are readily available in the Juarez area. A
significant percentage of the table bases produced at the facility are
painted in one of two basic colors. The bases are finished and painted with
a powder coat paint in Juarez prior to shipment to the Newport facility.
Table bases that are to be chrome plated in Newport are polished in Juarez
prior to shipment to Newport. The Juarez facility has warehouse storage
capabilities for staging west coast and international shipments. A small
portion of this facility's production is shipped, generally in truck-load
quantities, directly to the Company's customers. During 1994, the Company
constructed a new foundry in Juarez which increased the melting capacity from
60,000 pounds of scrap iron per day to 100,000 pounds per day. This new
foundry utilizes an emission-free electric furnace and came on-line in
December 1994. In December 1994, the land and building which housed the
Company's former foundry were sold by the Company to an unrelated third
party.
The Company's facility in Belmont, Mississippi, produces metal chairs that
are marketed to the restaurant, banquet, retail distribution, office, and
healthcare markets. Most chairs are manufactured totally in-house through a
process of metal bending, fabrication, semi-automatic welding and
upholstering. All metal chairs, including the Company's line of metal office
chairs imported from Italy, are then finished to customer requirements
through plating or powder coat painting.
The Company's facility in Belding, Michigan, acquired as part of the
acquisition of the assets of Charlotte Company, Inc., produces metal, wood
and upholstered chairs, which are principally marketed into the office
environment and upscale dining areas, and tables. The facility's high
quality woodworking, wood finishing and upholstery operations combine to
produce fully finished furniture to customer specifications. Upon
completion, products are cartoned to prevent damage in transportation.
The Company's facility in Arcadia, California, acquired as part of the
acquisition of the assets of Decor Concepts, produces fiberglass booths,
table tops, millwork and casegoods which are marketed to national restaurant
chains. In addition to manufacturing these additional products, this
facility also serves as a central distribution center for products
manufactured at other Falcon locations destined for the western United
States.
The Company's facility in Mimon, Czech Republic, produces wood chairs and
wood chair parts for export and sale within the Czech Republic.
Approximately 30% of this facility's production is for chair parts shipped to
the Company's facility in Lewisville, Arkansas, for assembly and final
finishing. This facility also exports finished chairs and chair parts to
customers in Austria, Israel, Italy, Germany, the Pacific Rim and North
America. This facility has wood drying, machining and bending capabilities
to produce chair frames from raw lumber and finishing and upholstery
capabilities to complete fully finished chairs to customer specifications.
The Company's facility in St. Louis, Missouri, produces wire shelving
systems and metal kitchen equipment. The production of wire shelving systems
begins with the receipt by the Company of unprocessed coiled steel wire and
stripping which are straightened, cut to length and welded into the shelving
systems. Much of the cutting and welding process is performed by numerically
controlled automated equipment. Raw steel tubing is purchased in appropriate
lengths and shelf support grooves are pressed into the tubing. Other steel
products for the foodservice industry, such as fry baskets, strainers and
whips, are produced at the facility from raw wire and wire mesh through a
manual cutting and welding process.
RAW MATERIALS
The Company manufactures most of its products to customer order from basic
raw materials. The Company utilizes a variety of raw materials in the
manufacture of its products, including rough lumber, laminates, particle
board, metal tubing, steel wire, scrap iron and various plastic components,
all of which the Company believes to be in abundant supply and available from
a variety of sources. The Company has no long-term supply contracts with any
of its suppliers and it has experienced no significant problems in obtaining
raw materials for its operations.
6
<PAGE> 7
Certain products sold by the Company, including unfinished wood chair
frames and frame components and tubular steel stacking chair components, are
purchased by the Company from other sources. The Company has not experienced
difficulty in obtaining sources to produce these products and believes that
alternative arrangements could be made to obtain these products should the
need arise. The Company subcontracts for all of its metal plating functions,
and the epoxy coating functions for its Williams Hodges division, with
companies located in the local area where the particular product is produced.
BACKLOG
As of October 28, 1995, the Company's backlog of orders for its products
believed to be firm was approximately $10.5 million, as compared to $7.6
million at October 29, 1994. The Company includes in backlog only orders
that it expects to ship within three months from acceptance thereof. Due to
the Company's short delivery time, backlog of orders is typically not
considered a significant measure of future sales.
COMPETITION
The foodservice, office furniture and lodging segments of the furniture
industry are fragmented and highly competitive with respect to each of the
products manufactured by the Company. The Company believes its competitive
strengths are its vertically integrated manufacturing, its emphasis on
customer service and support, its reputation for quality and responsiveness
to its customers, the one-stop shopping advantage made possible by the wide
variety of products offered by the Company and its ability to offer turnkey
interior decor systems. The Company competes for sales of each of its
products with numerous domestic and foreign manufacturers, many of which have
financial and other resources greater than the Company.
EMPLOYEES
As of December 31, 1995, the Company employed approximately 1,196 persons
in its six domestic operations, 258 in its manufacturing facility in Juarez,
Mexico, and 331 in its manufacturing facility in Mimon, Czech Republic. Of
these employees, approximately 1,743 were employed on a full-time basis and
42 on a part-time basis. Approximately 47 persons were employed in sales,
336 persons in administration and 1,402 in production.
TRADEMARKS AND PATENTS
The Company has registered the "FLIGHT" and "GENESIS" trademarks with the
United States Patent and Trademark Office. Management believes that the
Company's trademark position is adequately protected in all markets in which
the Company does business. The Company has received a patent on certain of
its furniture mechanisms and components. The Company believes that it is not
dependent upon patents, trademarks, servicemarks or copyrights.
GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL MATTERS
The Company's operations must meet extensive federal, state, and local
regulatory standards in the areas of safety, health and environmental
pollution controls. Historically, these standards have not had any material
adverse effect on the Company's sales or operations. Management believes
that its plants are in compliance in all material respects with all
applicable federal, state, and local laws and regulations concerned with
safety, health and environmental protection.
ACQUISITIONS
During September 1995, the Company acquired the interior decor business and
related assets, and assumed certain liabilities, relating to that business
from Omni Inc. The Company operates this business under the tradename Decor
Concepts, which was a tradename used by Omni Inc. for a substantial portion
of that business. Decor Concepts is a manufacturer of interior decor
products, including seating, tables and casegoods for restaurant chains. The
total purchase price for the transaction was approximately $1,540,000.
Approximately $1,095,000 of this price was paid at closing with the remainder
paid after the final valuation of certain assets was determined. This
transaction was funded by the Company with available cash reserves.
7
<PAGE> 8
During September 1994, the Company acquired a 67% controlling interest in
Falcon Mimon, 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 Falcon Mimon 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
Falcon Mimon during the subsequent five years to acquire equipment and make
certain plant improvements. This additional investment will increase the
Company's ownership interest in Falcon Mimon to approximately 84%. During
1995, the Company invested approximately $800,000 in Falcon Mimon, increasing
its ownership to 75%. 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.
In January 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 and
tables 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.
<TABLE>
ITEM 2. PROPERTIES.
The following table provides information with respect to each of the
Company's manufacturing facilities:
<CAPTION>
BUILDING AREA
LOCATION (SQUARE FEET) PRODUCTS LEASE/OWNERSHIP TERMS
-------- ------------- -------- ---------------------
<S> <C> <C> <C>
Newport, Tennessee 300,000 Table bases, table tops, millwork, Lease expiring in Decem-
casegoods and booths ber 2001 with two five-year
renewal options and option
to purchase
Belmont, Mississippi 227,000 Metal chairs Own 176,000 square feet in four
contiguous buildings; Lease 51,000
square foot building expiring in
November 2003, with a purchase
option
Lewisville, Arkansas 159,000 Wood chairs Leases expiring in February
1999 with a five-year re-
newal option and option to
purchase
Arcadia, California 100,000 Fiberglass booths, table tops, Lease 80,000 square feet in
millwork and casegoods contiguous buildings and
20,000 square feet in two other
buildings with terms ranging
from 1 year to 5 years
St. Louis, Missouri 142,000 Wire shelving and metal Owned
kitchen equipment
Belding, Michigan 89,000 Wood and metal chairs, Owned
and tables
Juarez, Mexico 51,000 Iron castings for table bases Owned
Mimon, Czech Republic 700,000 Wood chairs Owned
</TABLE>
8
<PAGE> 9
Management of the Company believes that its manufacturing and
warehousing facilities are in good condition and are adequate for the
purposes for which they are currently used. The capacity of the Company's
current facilities is considered by the Company to be adequate to meet
current needs and anticipated increases in sales volume for the foreseeable
future.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, the Company is subject to legal proceedings and
other claims arising in the ordinary course of its business. The Company
maintains insurance coverage against potential claims in an amount which it
believes to be adequate. The Company believes that it is not presently a
party to any litigation the outcome of which would have a material adverse
effect on its business or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of stockholders during the last
quarter of the Company's year ended October 28, 1995.
<TABLE>
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT<F*>.
The Executive Officers of the Company are:
<CAPTION>
NAME POSITION AGE
- - ---- -------- ---
<S> <C> <C>
Franklin A. Jacobs Chairman of the Board since 1971; President from 1957 to May 63
1981 and again from January 1984 to December 1995.
Richard Hnatek Senior Vice President-Sales since December 1993; 51
Vice President-Sales since November 1986.
Darryl Rosser President and Chief Operating Officer since December 1995; 44
Executive Vice President-Operations since May 1995;
Senior Vice President-Operations since December 1993; and
Vice President-Operations since January 1988.
Stephen L. Clanton <F1> Executive Vice President-Finance and Chief Financial Officer 44
since May 1995; Senior Vice President-Finance and
Chief Financial Officer since December 1993; Secretary
and Treasurer since July 1989 and Chief Financial Officer since
December 1989; and Vice President-Finance since December 1988.
Each officer is elected annually by the Board of Directors.
<FN>
- - -----------
<F*> This information is included in PART I as a separate item in accordance
with General Instruction G of Form 10-K under the Securities Exchange Act of
1934.
<F1> Mr. Clanton will become Executive Vice President-Strategic Development
effective January 22, 1996. Michael J. Dreller has been appointed Vice
President, Chief Financial Officer, Secretary and Treasurer as of such
date.
</TABLE>
9
<PAGE> 10
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
(a) Principal Market
On December 6, 1995, the Company's common stock, par value $.02
per share, was listed and began trading on the New York Stock Exchange under
the symbol FCP. Prior to that date, the Company's common stock was traded in
the National Market System of NASDAQ.
(b) Stock Price and Dividend Information
<TABLE>
The following table sets forth the high and low closing sales
prices per share for the Company's common stock and dividends paid per share
for the periods indicated. All per share price and shares outstanding
information set forth in this Report have been adjusted to reflect a 10%
stock dividend paid to stockholders of record on December 13, 1995.
<CAPTION>
MARKET PRICE
------------ DIVIDENDS
HIGH LOW PER SHARE
---- --- ---------
<S> <C> <C> <C>
Year ended October 29, 1994:
First Quarter $10.45 $ 8.41 $ -
Second Quarter 10.23 8.64 .014
Third Quarter 10.00 8.64 .014
Fourth Quarter 11.36 8.86 .014
Year ended October 28, 1995:
First Quarter $10.75 $ 9.55 $.02
Second Quarter 11.36 10.23 .02
Third Quarter 13.30 10.68 .02
Fourth Quarter 12.95 11.36 .02
</TABLE>
The $.014 per share cash dividend paid on April 15, 1994, was the
first cash dividend paid by the Company since 1979. Although the payment of
future dividends is in the discretion of the Board of Directors, the Company
expects to pay a regular quarterly dividend for the foreseeable future.
During the first quarter of 1995, the Company increased its cash dividend to
$.02 per share from $.014 per share. The Company again increased its
dividend in the first quarter of 1996, raising it to $.025 per share.
(c) Approximate Number of Holders of Common Stock
The approximate number of holders of record of the Company's
common stock as of January 15, 1996, was 845. .
10
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data presented below, as of and for each of
the fiscal years in the five-year period ended October 28, 1995, have been
derived from the consolidated financial statements of the Company, which have
been audited by Arthur Andersen LLP, independent public accountants. The
consolidated financial statements as of October 28, 1995, and October 29,
1994, and for each of the fiscal years in the three-year period ended October
28, 1995, and the report thereon, are included elsewhere herein. The
selected financial data should be read in conjunction with the consolidated
financial statements of the Company and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------------------
OCTOBER 28, OCTOBER 29, OCTOBER 30, OCTOBER 31, NOVEMBER 2,
1995 1994 1993 1992 1991
----------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales $90,036 $77,834 $62,957 $48,990 $39,446
Cost of sales 59,159 51,935 42,774 33,050 26,419
------- ------- ------- ------- -------
Gross margin 30,877 25,899 20,183 15,940 13,027
Selling, general and administrative
expenses 19,059 16,244 12,930 9,974 8,608
------- ------- ------- ------- -------
Operating profit 11,818 9,655 7,253 5,966 4,419
Other income (expense):
Interest income (expense), net 141 145 (223) (137) (381)
Minority interest in
consolidated subsidiary (44) 4 -- -- --
Other income -- -- -- -- 196
------- ------- ------- ------- -------
Earnings before income taxes 11,915 9,804 7,030 5,829 4,234
Income tax expense 4,458 3,628 2,583 2,094 1,567
------- ------- ------- ------- -------
Net earnings $ 7,457 $ 6,176 $ 4,447 $ 3,735 $ 2,667
======= ======= ======= ======= =======
Earnings per share <F1> $.77 $.64 $.50 $.48 $.42
==== ==== ==== ==== ====
OTHER DATA:
Depreciation and amortization $ 3,407 $ 2,767 $ 2,161 $ 1,165 $ 707
Capital expenditures 4,969 4,608 1,506 1,131 1,187
Book value per share <F1> 6.11 5.36 4.73 2.98 1.87
BALANCE SHEET DATA:
Working capital $29,927 $25,658 $25,129 $13,327 $ 7,767
Property, plant and equipment, net 22,187 19,117 11,644 11,334 6,860
Total assets 74,884 64,905 53,228 40,555 22,650
Long-term obligations 3,424 3,550 1,648 10,272 4,369
Stockholders' equity 58,307 50,556 44,147 23,404 11,561
<FN>
- - ----------
<F1> Per share data reflects adjustments related to the December
1995, 10% stock dividend and the January 1993, 50% stock dividend.
</TABLE>
11
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
General
During the last several years, the Company has devoted substantial
resources to its sales and marketing efforts, developed new markets and
distribution networks for its products, and implemented an aggressive program
of new product introductions. Significant resources have also been devoted
to developing and enlarging the Company's direct factory sales force.
<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>
OCTOBER 28, OCTOBER 29, OCTOBER 30,
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 65.7 66.7 67.9
Gross margin 34.3 33.3 32.1
Selling, general and administrative expenses 21.2 20.9 20.6
Operating profit 13.1 12.4 11.5
Interest income (expense), net .2 .2 (.3)
Minority interest in consolidated subsidiary (.1) - -
Earnings before income taxes 13.2 12.6 11.2
Income tax expense 5.0 4.7 4.1
Net earnings 8.2 7.9 7.1
</TABLE>
Fiscal 1995 compared to Fiscal 1994
Net earnings totaled $7,457,000 in 1995, compared to $6,176,000 in
1994, an increase of 20.7%. Earnings per share reached $.77 in 1995,
compared to $.64 in 1994, a 20.3% increase.
Net sales in 1995 were $90,036,000, an increase of 15.7% over 1994
net sales of $77,834,000. The sales increase over the prior year primarily
resulted from increased sales under the Company's National Accounts program,
which focuses on large national restaurant chains, strong sales results from
the Flight network of office furniture dealers, sales increases through
international distribution channels and incremental sales from the
acquisitions of Decor Concepts in 1995, and Charlotte and Falcon Mimon during
1994. Net sales for 1995 and 1994, excluding sales resulting from these
three acquisitions, were approximately $79,100,000 and $72,900,000,
respectively.
The strong sales results were favorably impacted by the Company's
continued concentration of resources on sales and marketing programs and new
product introductions. During 1995, the Company increased its direct factory
sales representatives that are selling its furniture products from 26 to 37
employees and placed these representatives in strategic locations.
The Company's gross margin increased from $25,899,000 in 1994 to
$30,877,000 in 1995, a 19.2% increase primarily due to the increased sales
volume. Gross margin as a percentage of sales increased to 34.3% in 1995
from 33.3% in 1994. The increase is primarily due to product mix and certain
production efficiencies at the Company's manufacturing facilities as a result
of the increased production volumes.
Selling, general and administrative expenses were $19,059,000 in
1995, compared to $16,244,000 in 1994, a 17.3% increase. The overall
increase is principally related to the higher level of business and the
acquisitions discussed above. As a percentage of net sales, selling, general
and administrative expenses were 21.2% in 1995 compared to 20.9% in 1994.
The increase in the expense rate in 1995 is primarily the result of the
Company's investment in new product development, sales and marketing
programs, including sales promotion costs, salaries, commissions and travel
expenses.
12
<PAGE> 13
Net interest income was $141,000 in 1995, compared to net interest
income of $145,000 in 1994. The interest income earned in 1995 and 1994
resulted from the investment of the Company's excess operating funds.
Income tax expense increased $830,000, or 22.9% in 1995 compared
to 1994, due to higher earnings and a slight increase in the effective tax
rate in 1995.
Fiscal 1994 compared to Fiscal 1993
Net earnings totaled $6,176,000 in 1994, compared to $4,447,000 in
1993, an increase of 38.9%. Earnings per share reached $.64 in 1994,
compared to $.50 in 1993, a 28.0% increase. Earnings per share increased at
a lower rate than net earnings principally due to the effects of the
1,150,000 additional shares of Common Stock issued and sold by the Company
in a public offering in June 1993 (the "1993 Stock Offering").
Net sales in 1994 were $77,834,000, an increase of 23.6% over 1993
net sales of $62,957,000. The sales increase over the prior year primarily
resulted from increased sales under the Company's National Accounts program,
which focuses on large national restaurant chains, strong sales results from
the Flight network of office furniture dealers, an increase in sales from the
Company's William Hodges division, sales increases through international
distribution channels and incremental sales from the acquisitions of
Charlotte and Falcon Mimon during 1994. Net sales for 1994 excluding sales
resulting from these two acquisitions were approximately $72,900,000.
The strong sales results were favorably impacted by the Company's
continued concentration of resources on sales and marketing programs and new
product introductions. During 1994, the Company increased its direct factory
sales representatives from 20 to 26 employees and placed these
representatives in several key territories.
The Company's gross margin increased from $20,183,000 in 1993 to
$25,899,000 in 1994, a 28.3% increase primarily due to the increased sales
volume. Gross margin as a percentage of sales increased to 33.3% in 1994
from 32.1% in 1993. The increase is primarily due to product mix, certain
production efficiencies at the Company's manufacturing facilities as a result
of the increased production volumes and implementation of a new purchasing
program to reduce material costs.
Selling, general and administrative expenses were $16,244,000 in
1994, compared to $12,930,000 in 1993, a 25.6% increase. The overall
increase is principally related to the greater sales volume. As a percentage
of net sales, selling, general and administrative expenses were 20.9% in 1994
compared to 20.6% in 1993. The increase in the expense rate in 1994 is
primarily the result of the Company's investment in sales and marketing
programs, including salaries, commissions and travel expenses.
Net interest income was $145,000 in 1994, compared to net interest
expense of $223,000 in 1993. The interest income earned in 1994 resulted
from the investment of the Company's excess operating funds and the remaining
funds from the 1993 Stock Offering in short-term, interest bearing
securities. The interest expense in 1993 was primarily related to borrowings
under the Company's revolving line of credit agreement to partially finance
the Kaydee Metal Products Corporation ("Kaydee") acquisition on August 3,
1992. The Company repaid all outstanding borrowings under the revolving line
of credit on June 3, 1993, with a portion of the proceeds from the 1993 Stock
Offering.
Income tax expense increased $1,045,000, or 40.5% in 1994 compared
to 1993, due to higher earnings and a slight increase in the effective tax
rate in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at October 28, 1995, was $29.9
million and its ratio of current assets to current liabilities was 3.3 to
1.0. During 1995, 1994 and 1993, cash provided by operating activities was
$5.7 million, $5.9 million and $3.3 million, respectively. Cash generated
from operations decreased in 1995 primarily due to an increase in inventory
levels which resulted from the acquisition of Decor Concepts.
13
<PAGE> 14
Net cash used in investing activities in 1995 was $5.7 million, a
decrease of $3.4 million from $9.1 million in 1994. This decrease was
primarily attributable to acquisition costs of approximately $4.5 million for
Falcon Mimon and Charlotte in 1994 compared to cash acquisition costs of $1.1
million for Decor Concepts in 1995.
Net cash used in financing activities was $.3 million in 1995, and
$.1 million in 1994. During 1995, the Company increased its regular
quarterly cash dividend to $.02 per share from $.014 per share. Also during
1995, the Company implemented a stock repurchase program.
In connection with the acquisition of Kaydee, on August 3, 1992,
the Company borrowed $8.5 million under an unsecured, $10 million revolving
line of credit agreement. The borrowing plus $2.5 million of the Company's
funds comprised the $11 million cash portion of the purchase price for the
Kaydee acquisition. In June 1993, the Company repaid all outstanding
borrowings under this agreement with a portion of the proceeds from the 1993
Stock Offering. During September 1993, the Company elected to reduce the
available line of credit from $10 million to $2 million. The revolving line
of credit bears interest at the London Interbank Offered Rate ("LIBOR") plus
1.25 percent and expires on July 1, 1997.
During 1995, 1994, and 1993, the Company incurred capital
expenditures of $5.0 million, $4.6 million, and $1.5 million, respectively.
The Company's capital budget for 1996 is approximately $4.0 million, which
will be used primarily to acquire new equipment. The increases in capital
expenditures in 1995 and 1994 were primarily to acquire new equipment and to
complete the expansion of the Company's foundry in Juarez, Mexico.
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.
Generally, inflation has not had a material effect on the Company
in the past, and no such effect is expected in the near future.
Historically, the Company has been able to increase prices to offset
increases in the cost of manufacturing its products, and management presently
believes that the Company will continue to be able to do so. The decreases
in the valuation of the Mexican peso that occurred during late 1994 and
throughout 1995 have not had a significant impact on the operations or
financial results of the Company or its subsidiary in Juarez, Mexico, and is
not expected to have a significant effect in the future.
14
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO FALCON PRODUCTS, INC.:
We have audited the accompanying consolidated balance sheets of
FALCON PRODUCTS, INC. (a Delaware corporation) and subsidiaries as of October
28, 1995, and October 29, 1994, and the related consolidated statements of
earnings, stockholders' equity and cash flows for each of the three fiscal
years in the period ended October 28, 1995. These financial statements and
the schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Falcon Products,
Inc. and subsidiaries as of October 28, 1995, and October 29, 1994, and the
results of their operations and their cash flows for each of the three fiscal
years in the period ended October 28, 1995, in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule listed in Item
14(a)2 is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
December 8, 1995
15
<PAGE> 16
<TABLE>
FALCON PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net sales $90,036,369 $77,834,153 $62,957,286
Cost of sales 59,159,360 51,935,502 42,773,773
----------- ----------- -----------
Gross margin 30,877,009 25,898,651 20,183,513
Selling, general and administrative expenses 19,059,443 16,243,445 12,930,253
----------- ----------- -----------
Operating profit 11,817,566 9,655,206 7,253,260
Interest income (expense), net; including interest income
of $316,459, $239,901 and $138,624, respectively 141,523 144,737 (223,248)
Minority interest in earnings of consolidated subsidiary (44,450) 4,085 -
----------- ----------- -----------
Earnings before income taxes 11,914,639 9,804,028 7,030,012
Income tax expense 4,457,960 3,627,870 2,582,600
----------- ----------- -----------
Net earnings $ 7,456,679 $ 6,176,158 $ 4,447,412
=========== =========== ===========
Earnings per share<F*> $.77 $.64 $.50
==== ==== ====
See accompanying notes to consolidated financial statements.
<FN>
- - -------
<F*> Per share data has been adjusted to reflect the effects of the December
1995, 10% stock dividend and January 1993, 50% stock dividend.
</TABLE>
16
<PAGE> 17
<TABLE>
FALCON PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 28, 1995, AND OCTOBER 29, 1994
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,969,786 $ 7,312,189
Accounts receivable, less allowances of $369,000 and $503,000,
respectively 17,438,415 14,318,450
Inventories 16,705,744 13,380,137
Prepaid expenses and other current assets 1,966,988 1,446,826
----------- -----------
Total current assets 43,080,933 36,457,602
----------- -----------
Property, plant and equipment:
Land 2,841,625 1,942,124
Buildings and improvements 11,871,150 10,404,634
Machinery and equipment 21,276,524 18,865,549
----------- -----------
35,989,299 31,212,307
Less accumulated depreciation 13,802,033 12,095,719
----------- -----------
22,187,266 19,116,588
----------- -----------
Other assets, net of accumulated amortization:
Excess of cost over fair value of net assets acquired 6,858,152 6,878,260
Other 2,757,863 2,452,703
----------- -----------
Total other assets 9,616,015 9,330,963
----------- -----------
$74,884,214 $64,905,153
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,158,284 $ 5,395,549
Accrued liabilities 5,031,264 4,734,911
Current maturities of long-term debt 963,976 669,442
----------- -----------
Total current liabilities 13,153,524 10,799,902
Long-term obligations:
Long-term debt 925,375 1,118,005
Pension liability 303,445 200,884
Deferred income taxes 1,185,722 1,211,507
Minority interest in consolidated subsidiary 1,009,502 1,019,311
----------- -----------
Total liabilities 16,577,568 14,349,609
----------- -----------
Stockholders' equity:
Common stock, $.02 par value:
Authorized 20,000,000 shares; issued
9,539,737 at October 28, 1995, and 8,572,756 at
October 29, 1994 190,795 171,455
Additional paid-in capital 42,760,776 30,510,061
Deferred compensation plan (70,769) --
Treasury stock, at cost (10,000 shares) (135,000) --
Cumulative translation adjustments 182,119 (38,621)
Retained earnings 15,378,725 19,912,649
----------- -----------
Total stockholders' equity 58,306,646 50,555,544
----------- -----------
$74,884,214 $64,905,153
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
17
<PAGE> 18
<TABLE>
FALCON PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993
<CAPTION>
Deferred
Additional Compen- Cumulative Total
Common Paid-in sation Treasury Translation Retained Stockholders'
Stock Capital Plan Stock Adjustments Earnings Equity
----- ------- ---- ----- ----------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, October 31, 1992 $142,905 $13,587,219 $ -- $ -- $ -- $9,673,738 $23,403,862
Net earnings -- -- -- -- -- 4,447,412 4,447,412
Net proceeds from stock offering 23,000 15,361,726 -- -- -- -- 15,384,726
Issuance of stock to Employee
Stock Purchase Plan 494 331,482 -- -- -- -- 331,976
Exercise of employee incentive
stock options 2,714 353,392 -- -- -- -- 356,106
Compensation expense under non-
qualified stock options -- 44,438 -- -- -- -- 44,438
Dividend in the form of
common stock 496 -- -- -- -- (496) --
Tax benefit upon exercise of
stock options -- 257,501 -- -- -- -- 257,501
Translation adjustments -- -- -- -- (78,819) -- (78,819)
-------- ----------- -------- --------- -------- ----------- -----------
Balance, October 30,1993 169,609 29,935,758 -- -- (78,819) 14,120,654 44,147,202
Net earnings -- -- -- -- -- 6,176,158 6,176,158
Cash dividends -- -- -- -- -- (384,163) (384,163)
Issuance of stock to Employee
Stock Purchase Plan 781 415,177 -- -- -- -- 415,958
Exercise of employee incentive
stock options 1,065 61,530 -- -- -- -- 62,595
Compensation expense under non-
qualified stock options -- 60,530 -- -- -- -- 60,530
Tax benefit upon exercise
of stock options -- 37,066 -- -- -- -- 37,066
Translation adjustments -- -- -- -- 40,198 -- 40,198
-------- ----------- -------- --------- -------- ----------- -----------
Balance, October 29, 1994 171,455 30,510,061 -- -- (38,621) 19,912,649 50,555,544
Net earnings -- -- -- -- -- 7,456,679 7,456,679
Cash dividends -- -- -- -- -- (690,743) (690,743)
Stock dividend 17,380 11,279,438 -- -- -- (11,299,860) (3,042)
Exercise of employee incentive
stock options 928 73,898 -- -- -- -- 74,826
Issuance of stock to Employee
Stock Purchase Plan 882 546,934 -- -- -- -- 547,816
Compensation expense under
non-qualified stock options -- 20,451 -- -- -- -- 20,451
Translation adjustments -- -- -- -- 220,740 -- 220,740
Issuance of restricted stock 150 89,225 (89,225) -- -- -- 150
Amortization of restricted
stock awards -- -- 18,456 -- -- -- 18,456
Treasury stock purchases -- -- -- (135,000) -- -- (135,000)
Tax benefit upon exercise
of stock options -- 240,769 -- -- -- -- 240,769
-------- ----------- -------- --------- -------- ----------- -----------
Balance, October 28, 1995 $190,795 $42,760,776 $(70,769) $(135,000) $182,119 $15,378,725 $58,306,646
======== =========== ======== ========= ======== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
18
<PAGE> 19
<TABLE>
FALCON PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,456,679 $ 6,176,158 $ 4,447,412
----------- ----------- -----------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 2,129,773 1,536,558 1,135,524
Amortization of other assets 1,277,134 1,230,786 1,025,512
Translation adjustments during year 220,740 40,198 (78,819)
Tax benefit upon exercise of stock options 240,769 37,066 257,501
Compensation expense under non-qualified
stock options 20,451 60,530 44,438
Amortization of restricted stock awards 18,456 -- --
Change in deferred income taxes (211,725) (96,784) 42,477
Minority interest in consolidated subsidiary (9,809) (4,085) --
Change in assets and liabilities:
Decrease (increase) in:
Accounts receivable, net (3,119,965) (3,157,055) (2,088,582)
Inventories (2,028,962) (410,230) (621,277)
Prepaid expenses and other current assets (334,222) 536,291 (517,641)
Other assets, net (1,328,083) (907,857) (1,032,991)
Increase (decrease) in:
Accounts payable 1,386,006 51,811 561,585
Accrued liabilities (51,100) 849,500 145,518
----------- ----------- -----------
Total adjustments (1,790,537) (233,271) (1,126,755)
----------- ----------- -----------
Net cash provided by operating activities 5,666,142 5,942,887 3,320,657
----------- ----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment (4,968,980) (4,607,953) (1,505,839)
Net retirements of property, plant and equipment 398,529 7,815 60,215
Cost of businesses acquired (including working capital at
dates of acquisition of $911,624 in 1995 and
$2,657,619 in 1994) (1,095,000) (4,523,422) --
----------- ----------- -----------
Net cash used in investing activities (5,665,451) (9,123,560) (1,445,624)
----------- ----------- -----------
Cash flows from financing activities:
Common stock issuances 622,792 478,553 16,072,808
Treasury stock purchases (135,000) -- --
Cash dividends (690,743) (384,163) --
Additions to long-term debt 627,484 -- 58,336
Repayment of long-term debt (525,580) (236,691) (8,448,132)
Increase (decrease) in pension liability (239,005) 8,777 (245,784)
Fractional share payout related to stock dividends (3,042) -- --
----------- ----------- -----------
Net cash provided by (used in)
financing activities (343,094) (133,524) 7,437,228
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (342,403) (3,314,197) 9,312,261
Cash and cash equivalents - beginning of period 7,312,189 10,626,386 1,314,125
----------- ----------- -----------
Cash and cash equivalents - end of period $ 6,969,786 $ 7,312,189 $10,626,386
=========== =========== ===========
Supplemental Cash Flow Information:
Cash paid for interest $ 159,570 $ 57,940 $ 388,677
=========== =========== ===========
Cash paid for income taxes $ 5,000,040 $ 3,062,327 $ 2,470,703
=========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
19
<PAGE> 20
FALCON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Falcon Products, Inc. and its subsidiaries (the Company). All
significant intercompany transactions are eliminated in consolidation.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to October
31. Fiscal years 1995, 1994, and 1993, ended October 28, 1995, October 29,
1994, and October 30, 1993, respectively, and included 52 weeks. References
to years relate to fiscal years rather than calendar years.
Nature of Business
The principal products manufactured and sold by the Company are
pedestal table bases, table tops, metal and wood chairs, booths, wire
shelving systems and other wire metal kitchen equipment, millwork and
casegoods. The Company's sales are primarily to the foodservice equipment,
contract furniture, healthcare and material handling markets. The Company
considers its operations a single industry segment.
The Company operates a cast iron foundry in Mexico which produces
all of its table base casting requirements. Substantially all of the sales
of this subsidiary are to the parent company and are eliminated in
consolidation. The Company has a manufacturing facility in the Czech
Republic, Falcon Mimon, a.s., formerly Miton, a.s., (Falcon Mimon), which
manufactures and sells chair frames and fully finished wood chairs throughout
Europe and in North America. Sales from foreign operations and export sales
were $9.7 million, $4.8 million and $3.5 million in 1995, 1994 and 1993,
respectively.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with
an original maturity of three months or less to be cash equivalents.
Inventories
Inventories are valued at the lower of cost or market. Cost is
determined by the first-in, first-out method.
Property, Plant and Equipment
Investments in property, plant and equipment are recorded at cost.
Improvements are capitalized, while repair and maintenance costs are charged
to operations. When assets are retired or disposed of, the cost and
accumulated depreciation are removed from the accounts; gains or losses are
included in operations.
Depreciation, including the amortization of assets recorded under
capital leases, is computed by use of the straight-line method over estimated
service lives. Principal service lives are: buildings and improvements - 5
to 40 years; machinery and equipment - 3 to 13 years.
Certain of the Company's assets were acquired through long-term
lease obligations financed principally by Industrial Development Revenue
Bonds. These leases represent installment purchases. Accordingly, the assets
are recorded at cost and the related obligations are included in long-term
obligations as mortgages payable.
20
<PAGE> 21
FALCON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993
Other Assets
The excess of cost over fair value of net assets acquired is
amortized on a straight-line basis over thirty to forty years. Deferred debt
issue costs are amortized on a straight-line basis over the original life of
the respective debt issue, approximately seven years. The cost of the
design, production and distribution of sales catalogs is being amortized on a
straight-line basis over five years.
<TABLE>
Other assets consist of the following at October 28, 1995, and
October 29, 1994:
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Excess of cost over fair value of net assets acquired, net of
accumulated amortization of $1,195,152 and $940,942 $6,858,152 $6,878,260
Deferred catalog costs, net of accumulated amortization of
$1,375,865 and $966,694 656,691 1,065,862
Deferred debt issue costs, net of accumulated amortization of
$42,208 and $38,144 15,249 19,313
Other, net of accumulated amortization of $1,573,880 and $964,191 2,085,923 1,367,528
---------- ----------
$9,616,015 $9,330,963
========== ==========
</TABLE>
Pension Plans
The Company has a noncontributory pension plan in effect covering
certain hourly and substantially all salaried personnel. The Company's
policy is to fund pension benefits to the extent contributions are deductible
for tax purposes and in compliance with federal laws and regulations. The
Company also contributes to a defined contribution pension plan for its St.
Louis, Missouri, union employees.
Stock Dividends
On November 21, 1995, the Board of Directors of the Company
declared a 10% stock dividend. The record date of this transaction was
December 13, 1995, with a distribution date of January 2, 1996. On
December 17, 1992, the Board of Directors of the Company declared a
three-for-two split of its common stock, effected in the form of a 50% stock
dividend. The record date of this transaction was January 8, 1993, with a
distribution date of January 19, 1993. All information contained in the
accompanying Consolidated Financial Statements and these Notes to
Consolidated Financial Statements relating to the Company's common stock,
including shares outstanding, stock option plans and per share data has been
restated to give effect to the two stock dividends discussed above.
Foreign Currency Translation
The Financial Statements of the Company's non-U.S. subsidiaries
are translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards No. 52. The functional currency for Falcon Mimon, and
the Company's European sales subsidiary in Paris, France, has been determined
to be the subsidiaries' local currency. As a result, the gain or loss
resulting from the translation of their financial statements to U.S. dollars
is included as a separate component of stockholders' equity.
21
<PAGE> 22
FALCON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993
For the Company's Mexican subsidiary (and its European sales subsidiary
prior to the fourth quarter of 1993), inventory, prepayments and property are
translated at historical exchange rates while other assets and liabilities
are translated at current exchange rates. Revenues and expenses are
translated at average exchange rates during the year. The resulting
translation adjustment is included in selling, general and administrative
expenses.
The net foreign currency translation and transaction losses included in
earnings for 1995, 1994 and 1993, were $271,000, $61,000, and $72,000,
respectively.
NOTE 2 -- INVENTORIES
<TABLE>
Inventories at the end of the fiscal years consist of the following:
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Raw materials $11,789,509 $ 9,290,638
Work in process 3,408,788 3,056,037
Finished goods (net) 1,507,447 1,033,462
----------- -----------
$16,705,744 $13,380,137
=========== ===========
</TABLE>
NOTE 3 -- RENTAL EXPENSE AND LEASE COMMITMENTS
The Company leases certain manufacturing facilities and certain
office and transportation equipment under non-cancelable lease agreements
having an initial term of more than one year and expiring at various dates
through the year 2001.
<TABLE>
The future minimum rental commitments due under lease agreements are as
follows at October 28, 1995:
<CAPTION>
Capital Operating
Leases Leases
--------- -----------
<S> <C> <C>
1996 $ 61,000 $ 858,000
1997 61,000 564,000
1998 61,000 493,000
1999 61,000 481,000
2000 61,000 385,000
Later years 247,000 449,000
-------- ----------
Total minimum lease payments 552,000 $3,230,000
==========
Less-amount representing interest ( 96,000)
--------
Present value of minimum lease payments $456,000
========
</TABLE>
Total operating lease and rental expense was approximately $641,000,
$589,000, and $816,000 in 1995, 1994 and 1993, respectively.
22
<PAGE> 23
FALCON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993
NOTE 4 -- LONG-TERM DEBT
<TABLE>
Long-term debt consists of the following:
<CAPTION>
OCTOBER 28, OCTOBER 29,
1995 1994
----------- -----------
<S> <C> <C>
Revolving line of credit, interest at LIBOR plus 1.25%, due monthly until
July 1, 1997. $ -- $ --
Notes payable to a foreign bank, secured by certain assets of Falcon Mimon,
due in varying quarterly installments through 1998 with interest rates
ranging from 13.0% to 14.9% 873,580 1,163,850
Note payable to a bank, due in quarterly installments through May 1996, with
interest rates at the bank's quoted 90 day French Franc rate plus 1.25%,
(7.4% at October 28, 1995) 487,726 --
Obligations under capital leases, due in annual installments
through November 16, 2003, with an interest rate of 4.0% 455,548 496,939
Community Development Block Grant Loan, secured by machinery
and equipment, due in monthly installments through 1997, with an interest
rate of 7.5% 72,497 121,042
Mortgages payable, due in varying monthly installments through
1995, with a weighted average interest rate of 5.0% in 1994 -- 3,444
Other -- 2,172
--------- ----------
1,889,351 1,787,447
Less current maturities 963,976 669,442
--------- ----------
$ 925,375 $1,118,005
========= ==========
</TABLE>
At October 28, 1995, the Company had letters of credit outstanding of
approximately $31,000 relating to certain foreign purchases.
The Company has a $2 million line of credit which bears interest at LIBOR
plus 1.25%, as adjusted quarterly, and matures on July 1, 1997. The line of
credit requires a commitment fee equal to .25% on the average unused portion.
Under the loan agreements, the Company must comply with certain covenants
including, but not limited to, the maintenance of specific ratios and net
worth. The Company has complied with the terms of the loan agreements.
23
<PAGE> 24
FALCON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993
The minimum annual maturities of long-term debt, including capital lease
obligations, are as follows at October 28, 1995:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 963,976
1997 493,486
1998 78,636
1999 80,498
2000 50,358
Later years 222,397
----------
$1,889,351
==========
</TABLE>
NOTE 5 -- INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
No. 109). SFAS No. 109 requires income taxes to be accounted for using a
balance sheet approach known as the liability method. The liability method
accounts for deferred income taxes by applying statutory tax rates in effect
at the date of the balance sheet to differences between the book and tax
basis of assets and liabilities. Adjustments to deferred income taxes
resulting from statutory rate changes flow through the tax provision in the
year of the change.
<TABLE>
The components of income tax expense are as follows:
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $4,180,189 $3,313,872 $1,902,432
State 501,036 403,712 228,396
Foreign (11,540) 7,070 --
Deferred (211,725) ( 96,784) 451,772
---------- ---------- ---------
$4,457,960 $3,627,870 $2,582,600
========== ========== ==========
</TABLE>
24
<PAGE> 25
FALCON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993
Following is a reconciliation between statutory federal income tax
expense and actual income tax expense:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Computed "expected" federal income tax expense $4,050,977 $3,333,370 $2,390,204
Increase (decrease) resulting from:
State income taxes 476,600 392,400 281,200
Other, net (69,617) ( 97,900) (88,804)
---------- ---------- ----------
$4,457,960 $3,627,870 $2,582,600
========== ========== ==========
</TABLE>
The significant components of deferred income tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
October 28, October 29,
1995 1994
------------- -------------
<S> <C> <C>
Deferred tax assets:
Inventories $ 504,743 $ 486,223
Reserves and accruals 666,435 470,459
Other 118,765 147,321
---------- -----------
1,289,943 1,104,003
---------- -----------
Deferred tax liabilities:
Depreciation and other property basis differences (877,504) (1,041,296)
Other (308,218) (170,211)
---------- -----------
(1,185,722) (1,211,507)
---------- -----------
Net deferred income tax asset (liability) $ 104,221 $ (107,504)
========== ===========
</TABLE>
Net current deferred income tax assets are included in prepaid
expenses and other current assets in the accompanying Consolidated Balance
Sheets. The Company's income tax returns have been examined by the Internal
Revenue Service for fiscal years through November 3, 1990.
NOTE 6 -- STOCK OPTION AND STOCK PURCHASE PLANS
The Company had an employee incentive stock option plan which
expired in 1991. As of October 28, 1995, there were outstanding options to
purchase 46,610 shares of the Company's common stock under this plan,
expiring at various dates through June 2001.
In 1991, the Company created a new stock option plan (the "1991
Plan"), which, as amended, allows the Company to grant key employees
incentive and non-qualified stock options to purchase up to 1,100,000 shares
of the Company's common stock at not less than the market price on the date
of grant. Options not exercised accumulate and are exercisable, in whole or
in part, in any subsequent period but not later than ten years from the date
of grant. Certain options granted under the 1991 Plan to officers and key
employees became exercisable immediately. As of October 28, 1995, options to
purchase 552,816 shares of the Company's common stock were outstanding under
the 1991 Plan.
25
<PAGE> 26
FALCON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993
Stock option transactions under the expired plan and the 1991 Plan
are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------ ------------------------
AVERAGE NUMBER AVERAGE NUMBER
PRICE OF SHARES PRICE OF SHARES
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Options outstanding at beginning of year $ 8.07 495,211 $ 5.99 295,677
Options granted $10.19 151,250 $ 9.77 237,600
Options canceled $ 9.66 22,627 $11.59 4,125
Options exercised $ 1.77 24,408 $ 1.38 33,941
------- -------
Options outstanding at end of year $ 8.81 599,426 $ 8.07 495,211
======= =======
Exercisable at end of year 171,339 109,496
======= =======
</TABLE>
The Company has a Non-Employee Director stock option plan, approved by the
stockholders in 1992, under which the Company annually grants an option to
purchase common stock to each director who is neither an executive officer of
the Company nor compensated under any employment or consulting arrangements
("Non-Employee Director"). Under the plan, during 1991, the Company granted
to its then Non-Employee Directors options to purchase a total of 30,525
shares (or 825 shares per Non-Employee Director per year of service on the
Company's Board, with a maximum of 10 years) at an exercise price of $0.61
per share. The plan provides that the options are exercisable, on a
cumulative basis, at the rate of 20% per year over a five-year period,
commencing on the date of grant.
In September 1992, the Board unanimously amended the plan, approved by the
stockholders at the 1993 annual meeting, to increase the number of shares as
to which options will be granted annually to 1,650 shares per director, and
to establish the option exercise price in fiscal 1992 of $5.23 per share and,
for fiscal years beginning in fiscal 1993, at the fair market value of the
Company's common stock on the date of grant. Under the plan, the date of
grant for fiscal 1992 was established as September 15, 1992, and for fiscal
1993 and thereafter, the annual date of grant is December 17.
In 1992, restricted options to purchase 7,425 shares of common stock at an
exercise price of $4.09 per share were granted to certain employees of the
Company. In 1991, restricted options to purchase 33,000 shares of common
stock at $0.61 per share were granted to certain employees of the Company.
These options are exercisable, on a cumulative basis, at the rate of 20% per
year over a five-year period commencing on the date of the grant.
Compensation expense of approximately $7,000 relating to non-qualified
options will be recognized by the Company during 1996.
In addition to the foregoing, fully exercisable stock options to
purchase a total of 190,555 shares were issued to one past and eight current
directors between June 9, 1986, and March 13, 1990, at option prices ranging
from $0.79 to $2.93 per share.
The Company has a Stock Purchase Plan under which eligible employees may
elect to invest up to 10% of salary earned during each pay period. Directors
who are not employees may also elect to invest up to 10% of director fees.
The Company contributes an amount equal to 40% of each participant's
contributions and pays all administrative expenses and brokerage fees of the
plan.
In 1995, the Company awarded 2,750 shares of restricted common stock of the
Company to each of three executive officers. The shares will vest and the
related expense will be recorded over three years.
26
<PAGE> 27
FALCON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993
NOTE 7 -- PENSION PLANS
The Company has a noncontributory defined benefit pension plan covering
certain hourly and substantially all salaried personnel. Normal retirement
age is 65, but provision is made for earlier retirement. Benefits are based
on 1.5% of average annual compensation, up to $75,000 per year after November
1, 1992, and up to $50,000 per year before November 1, 1992, for each year of
service. Full vesting occurs upon completion of five years of service.
Assets of the plan consist entirely of an investment in a group annuity
contract with an insurance company.
The following actuarial assumptions were used in determining the
Company's net periodic pension cost and projected benefit obligation:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Actuarial Assumptions:
Discount rate 7.50% 7.50% 6.50%
Rate of salary increase 5.50% 5.50% 5.50%
Expected long-term rate of return on plan assets 9.00% 9.00% 7.75%
</TABLE>
<TABLE>
The funded status of the defined benefit pension plan is as follows:
<CAPTION>
OCTOBER 28, OCTOBER 29,
1995 1994
----------- -----------
<S> <C> <C>
Vested benefit obligation $(2,683,231) $(2,224,284)
Non-vested benefits (323,995) (118,853)
----------- -----------
Accumulated benefit obligation (3,007,226) (2,343,137)
Effect of projected future compensation levels (423,164) (315,004)
----------- -----------
Projected benefit obligation (3,430,390) (2,658,141)
Plan assets at fair value 2,639,588 1,933,200
----------- -----------
Plan assets less than projected benefit obligation (790,802) (724,941)
Unrecognized net (gain) loss due to past experience different
from assumptions 192,879 (119,507)
Unrecognized prior service cost 461,501 509,113
Unrecognized net asset being recognized over 13.21 years (168,783) (208,875)
----------- -----------
Accrued pension cost $ (305,205) $ (544,210)
=========== ===========
</TABLE>
27
<PAGE> 28
FALCON PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993
<TABLE>
Net periodic pension cost for the years ended:
<CAPTION>
OCTOBER 28, OCTOBER 29, OCTOBER 30,
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Service cost - benefits earned during the period $334,947 $283,954 $234,052
Interest cost on projected benefit obligation 212,233 179,986 151,354
Return on plan assets (332,269) 12,521 (234,265)
Net total of other components 136,295 (179,569) 111,293
-------- -------- --------
Net periodic pension cost $351,206 $296,892 $262,434
======== ======== ========
</TABLE>
The Company also contributes to a defined contribution pension
plan for its St. Louis, Missouri, union employees. Pension expense under this
plan was $31,600, $21,800, and $18,900 in 1995, 1994 and 1993, respectively.
NOTE 8 -- BUSINESS ACQUISITIONS
During September 1995, the Company acquired the interior decor
business and related assets, and assumed certain liabilities, relating to
that business from Omni Inc. The Company operates this business under the
tradename Decor Concepts, which was a tradename used by Omni Inc. for a
substantial portion of that business. Decor Concepts is a manufacturer of
interior decor products such as seating, table, and casegoods for restaurant
chains. The total purchase price for the transaction was approximately
$1,540,000. Approximately $1,095,000 of this price was paid at closing with
the remainder paid during December 1995, after the final valuation of certain
assets was determined. This purchase was funded by the Company with its
available cash reserves.
During September 1994, the Company acquired a 67% controlling
interest in Falcon Mimon for approximately $2.3 million in cash. Falcon
Mimon is a furniture manufacturer located in the Czech Republic that makes
complete wood chairs and wood chair components for sale throughout Europe,
Israel and North America. Under terms of the Company's purchase agreement,
it will invest an additional $2.5 million in Falcon Mimon during the
subsequent five years, which will increase the Company's ownership interest
in Falcon Mimon to approximately 84%. During 1995, the Company invested
approximately $798,000 in Falcon Mimon, increasing its ownership to 75%.
During January 1994, the Company acquired substantially all of the
assets and assumed certain liabilities of Charlotte Company, Inc.
("Charlotte") located in Belding, Michigan, a manufacturer of high quality
wood and metal seating and tables, for the lodging, foodservice, healthcare
and office furniture markets. The total purchase price for the transaction
was approximately $3.4 million and was funded by the Company with its
available cash reserves.
NOTE 9 -- TRANSACTIONS WITH RELATED PARTIES
Certain of the Company's directors or their affiliates provide
various consulting and other professional services to the Company or receive
commissions as sales representatives. During 1995, 1994 and 1993, the
Company incurred expenses of approximately $138,000, $280,000, and $209,000,
respectively, for such services.
28
<PAGE> 29
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained under the caption "INFORMATION ABOUT
THE NOMINEES" in the Company's definitive proxy statement to be filed
pursuant to Regulation 14A for the Company's 1996 annual meeting
of stockholders (the "Proxy Statement"), which involves the election of
directors, is incorporated herein by this reference.
Information regarding executive officers of the Company is
contained in Part I hereof under the caption "Executive Officers of the
Registrant."
Information regarding compliance with Section 16(a) of the
Securities Exchange Act of 1934 will be included in the Company's Proxy
Statement under the caption "Compliance with Section 16(a) of the Securities
Exchange Act of 1934."
ITEM 11. EXECUTIVE AND DIRECTOR COMPENSATION.
The information contained under the captions "EXECUTIVE
COMPENSATION", "COMPENSATION OF DIRECTORS" and "INFORMATION AS TO
STOCK OPTIONS" in the Company's definitive proxy statement to be filed
pursuant to Regulation 14A for the Company's 1996 annual meeting of
stockholders, which involves the election of directors, is incorporated
herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information contained under the captions "VOTING
SECURITIES, PRINCIPAL HOLDERS THEREOF AND CUMULATIVE VOTING RIGHTS" and
"SECURITY OWNERSHIP OF MANAGEMENT" in the Company's definitive proxy
statement to be filed pursuant to Regulation 14A for the Company's 1996
annual meeting of stockholders, which involves the election of directors, is
incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the caption "TRANSACTIONS WITH
ISSUER AND OTHERS" in the Company's definitive proxy statement to be filed
pursuant to Regulation 14A for the Company's 1996 annual meeting of
stockholders, which involves the election of directors, is incorporated
herein by this reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
<TABLE>
(a) 1. Financial Statements
The following Consolidated Financial Statements of the Company are
included in Part II, Item 8:
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants 15
Consolidated Statements of Earnings for the years ended October 28, 1995, October 29, 1994,
and October 30, 1993 16
Consolidated Balance Sheets as of October 28, 1995, and October 29, 1994 17
29
<PAGE> 30
<CAPTION>
Page
----
<S> <C>
Consolidated Statements of Stockholders' Equity for the years ended October 28, 1995,
October 29, 1994, and October 30, 1993 18
Consolidated Statements of Cash Flows for the years ended October 28, 1995,
October 29, 1994, and October 30, 1993 19
Notes to Consolidated Financial Statements 20
(a) 2. Financial Statement Schedules
The following financial statement schedules are included in Item 14:
Schedule II-Valuation and Qualifying Accounts for the years ended October 28, 1995, October 29, 1994,
and October 30, 1993 31
(a) 3. Exhibits:
See Exhibit Index on pages 33 through 35 of this Report (identifying each management contract
or compensatory plan or arrangement listed therein).
(b) Reports on Form 8-K:
The Company has not filed any reports on Form 8-K during the last quarter of the year ended
October 28, 1995.
</TABLE>
30
<PAGE> 31
<TABLE>
FALCON PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993
<CAPTION>
ADDITIONS ACQUISI-
BALANCE AT CHARGED TO TIONS FROM DEDUCTIONS BALANCE AT
BEGINNING COSTS AND ACQUIRED FROM END OF
DESCRIPTION OF PERIOD EXPENSES COMPANIES RESERVES PERIOD
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
and anticipated returns:
Year ended October 28, 1995 $502,881 $708,620 $ -- $842,056<FA> $369,445
======== ======== ======= ======== ========
Year ended October 29, 1994 $242,844 $618,199 $84,586 $442,748<FA> $502,881
======== ======== ======= ======== ========
Year ended October 30, 1993 $255,576 $568,356 $ -- $581,088<FA> $242,844
======== ======== ======= ======== ========
<FN>
- - ------------
<FA> Accounts charged off less recoveries and returns.
</TABLE>
31
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FALCON PRODUCTS, INC.
Date: January 22, 1996 By /s/ Franklin A. Jacobs
----------------------------------
Franklin A. Jacobs,
Chairman of the Board
and Chief Executive Officer
Date: January 22, 1996 By /s/ Michael J. Dreller
----------------------------------
Michael J. Dreller
Vice President, Chief Financial
Officer, Secretary and Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated:
Date: January 22, 1996 /s/ Franklin A. Jacobs
----------------------------------------
Franklin A. Jacobs, Director
Date: January 22, 1996 /s/ Donald P. Gallop
----------------------------------------
Donald P. Gallop, Director
Date: January 22, 1996 /s/ S. Lee Kling
----------------------------------------
S. Lee Kling, Director
Date: January 22, 1996 /s/ Lee M. Liberman
----------------------------------------
Lee M. Liberman, Director
Date:
----------------------------------------
Alan Peters, Director
Date:
----------------------------------------
James Schneider, Director
Date:
----------------------------------------
Raynor E. Baldwin, Director
Date: January 22, 1996 /s/ James L. Hoagland
----------------------------------------
James L. Hoagland, Director
Date:
----------------------------------------
Frank E. Hancock, Director
32
<PAGE> 33
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
<C> <S>
3.1 Certificate of Incorporation of the Company, as amended through
October 31, 1980, filed as Exhibit 3(a) to the Company's Annual
Report on Form 10-K for the year ended October 31, 1980.
3.2 Amendment to Certificate of Incorporation, effective July 3, 1986, filed
as Exhibit 3(b) to the Company's Annual Report on Form 10-K for the
year ended November 1, 1986.
3.3 Amended and Restated Bylaws incorporated herein by reference to
Exhibit 3.3 to the Company's Annual Report on Form 10-K for the
year ended November 2, 1991.
4 Form of Stock Certificate for Common Stock, incorporated herein by
reference to Exhibit 4.1 to the Company's Registration Statement on Form
S-1, Reg. No. 33-61706.
10.1 Lease Agreement dated February 1, 1980, between Lafayette County,
Arkansas and the Company, incorporated herein by reference to Exhibit 10(e)
to the Company's Annual Report on Form 10-K for the year ended
October 31, 1980.
10.2 Bond Guaranty Agreement dated February 1, 1980, pursuant to which the
Company has guaranteed payment of $800,000 principal amount of Industrial
Development Revenue Bonds (Falcon Project), Series 1980, incorporated
herein by reference to Exhibit 10(f) to the Company's Annual Report on
Form 10-K for the year ended October 31, 1980.
10.3 Loan Agreement dated as of February 1, 1985, between the City of Newport,
Tennessee and the Company, incorporated herein by reference to Exhibit 4(m)
to the Company's Annual Report on Form 10-K for the year ended November 2, 1985.
10.4 Loan and Security Agreement dated as of August 1, 1989, between the City of
Newport, Tennessee and the Company and related Note, incorporated herein by
reference to Exhibit 4(p) to the Company's Annual Report on Form 10-K
for the year ended October 28, 1989.
10.5 Assignment and Assumption Agreement dated January 30, 1980, and the lease
thereunder, incorporated herein by reference to Exhibit 10(g) to the Company's
Annual Report on Form 10-K for the year ended October 31, 1980.
10.6 Lease Agreement dated as of June 1, 1988, among Burley Builders, Inc. and
Tennessee Tobacco Sales, Incorporated, as lessors, and the Company, as lessee,
incorporated herein by reference to Exhibit 10(m) to the Company's Annual
Report on Form 10-K for the year ended October 29, 1988.
10.7 First Amendment to Lease Agreement dated as of November 21, 1991, among
Burley Builders, Inc. and Tennessee Tobacco Sales, Incorporated, as lessors,
and the Company, as lessee, incorporated herein by reference to Exhibit 10.9
to the Company's Annual Report on Form 10-K for the year ended November 2, 1991.
</TABLE>
33
<PAGE> 34
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
<C> <S>
10.8<Fa> Falcon Products, Inc. 1981 Employee Incentive Stock Option Plan ("ISOP"),
incorporated herein by reference to Exhibit 4(h) to the Company's Registration
Statement on Form S-8, Reg. No. 33-15698.
10.9<Fa> Form of Stock Option Agreement dated June 9, 1986, regarding options issued
to Directors, incorporated herein by reference to Exhibit 10(i) to the Company's
Annual Report on Form 10-K for the year ended November 1, 1986.
10.10<Fa> Stock Option Agreement dated June 9, 1986, regarding options issued to
Franklin A. Jacobs, incorporated herein by reference to Exhibit 10(i) to the Company's
Annual Report on Form 10-K for the year ended November 1, 1986.
10.11<Fa> First Amendment to the ISOP, adopted June 16, 1987, incorporated herein
by reference to Exhibit 10(1) to the Company's Annual Report on Form 10-K
for the year ended October 31, 1987.
10.12<Fa> Falcon Products, Inc. Amended and Restated 1991 Stock Option Plan, incor-
porated herein by reference to Exhibit 4.1 to the Company's Registration State-
ment on Form S-8, Reg. No. 33-46997.
10.13<Fa> Falcon Products, Inc. Amended and Restated Stock Purchase Plan, incorporated
herein by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for
the year ended November 2, 1991.
10.14<Fa> Minutes of Meeting of Board of Directors of the Company dated March 14, 1991
(the "Non-Employee Director Plan"), incorporated herein by reference to Exhibit 4.1
to the Company's Registration Statement on Form S-8, Reg. No. 33-46998.
10.15 Debt Agreement dated August 3, 1992 (the "Debt Agreement"), between the
Company and Boatmen's Bank ("Boatmen's") entered into with respect to a
$10,000,000 revolving line of credit from Boatmen's to the Company, incorporated
herein by reference to Exhibit 10.15 to the Company's Annual Report on
Form 10-K for the year ended October 31, 1992 (the "1992 10-K").
10.16 Asset Purchase Agreement dated as of August 3, 1992, by and among Falcon
Acquisition Subsidiary, Inc., the Company and Kaydee Metal Products Corporation,
incorporated herein by reference to Exhibit 2 to the Company's Current Report on
Form 8-K dated August 3, 1992.
10.17<Fa> Minutes of Meeting of Board of Directors of the Company dated September 15, 1992,
amending the Non-Employee Director Plan, incorporated herein by reference to Exhibit
10.17 to the 1992 10-K.
10.18<Fa> Amendment to the Falcon Products, Inc. Amended and Restated 1991 Stock Option Plan
incorporated herein by reference to Exhibit 10.18 to the Company's Annual Report on
Form 10-K for the year ended October 30, 1993 (the "1993 10-K").
10.19<Fa> Consulting Agreement dated August 1, 1993, by and between the Company and AJR
Enterprises, Inc., incorporated herein by reference to Exhibit 10.19 to the 1993 10-K.
<FN>
- - ----------
<Fa> Management contract or compensatory plan or arrangement required to be
filed pursuant to Item 14(c) of Form 10-K.
</TABLE>
34
<PAGE> 35
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
<C> <S>
10.20 Amendment to the Debt Agreement dated as of September 24, 1993, incorporated
herein by reference to Exhibit 10.20 to the 1993 10-K.
10.21 Second Amendment to the Debt Agreement dated as of August 30, 1994, incorporated
herein by reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K for
the year ended October 29, 1994 (the "1994 10-K").
10.22 Third Amendment to the Debt Agreement dated as of September 8, 1994, incorporated
herein by reference to Exhibit 10.22 to the 1994 10-K.
10.23<Fa> Amendment No. 2 to the Falcon Products, Inc. Amended and Restated 1991 Stock
Option Plan, incorporated herein by reference to Exhibit 10.23 to the 1994 10-K.
10.24 Agreement of Purchase and Sale of Assets dated September 26, 1995, by and between
Falcon Products, Inc. and DPD Manufacturing, Inc., filed herewith.
10.25 Agreement of Purchase and Sale of Assets dated September 26, 1995, by and between
Falcon Products, Inc. and Decor Concepts, Inc., filed herewith.
11 Computation of Net Earnings Per Share, filed herewith.
21 Subsidiaries of the Company, filed herewith.
23 Consent of Independent Public Accountants, filed herewith.
<FN>
- - ----------------
<Fa> Management contract or compensatory plan or arrangement required to be filed pursuant
to Item 14(c) of Form 10-K.
</TABLE>
35
<PAGE> 1
DMP/TDB: 9/26/95
AGREEMENT OF PURCHASE AND SALE
OF ASSETS
by and between
DPD MANUFACTURING, INC.,
("Seller")
and
FALCON PRODUCTS, INC.
("Buyer")
<PAGE> 2
AGREEMENT OF PURCHASE AND SALE
OF ASSETS
THIS AGREEMENT OF PURCHASE AND SALE OF ASSETS ("Agreement") is made and
entered into as of the 29th day of September, 1995, by and between DPD
MANUFACTURING, INC., a California corporation ("Seller"), and FALCON PRODUCTS,
INC., a Delaware corporation ("Buyer").
RECITALS AND CERTAIN DEFINITIONS
--------------------------------
A. Seller owns all of the equipment and tooling used in the production of
fiberglass products at 400, 410 and 420 Irwindale Avenue, Azusa.
B. Buyer desires to purchase from Seller and Seller desires to sell to
Buyer, on the terms and subject to the conditions of this agreement, such
equipment and tooling in exchange for the cash and other consideration of
Buyer described herein.
C. For purposes of this Agreement, the terms set forth below shall have
the following meanings:
"ASSETS" means the Equipment.
"BILL OF SALE" is defined in Section 7(a)(i).
"CASH EQUIVALENT" means a wire transfer of funds or other good and
immediately available funds.
"CLOSING" means the closing at which the transfer of the Assets shall
take place as provided herein.
"CLOSING DATE" is defined in Section 5.
"EQUIPMENT" means all of the equipment and tooling of Seller used by
Decor Concepts, Inc. in production of fiberglass products and located at the
Real Property.
"LEASE" means that certain lease between ACR Investments, Inc. as
lessor and Decor Concepts, Inc. as lessee dated August 1, 1994 and assigned to
Seller by assignment dated August 28, 1995, a copy of which is attached hereto
as Exhibit B.
"REAL PROPERTY" means the real property leased to Seller pursuant to
the Lease and that certain property leased to Decor Concepts, Inc. located at
420 Irwindale Avenue, Azusa, California.
The terms of this Agreement are as follows:
1. Purchase of Sale. Seller agrees to sell to Buyer, and Buyer agrees
----------------
to purchase from Seller, the Assets upon the terms and conditions set forth in
this Agreement.
1
<PAGE> 3
2. Payment of Purchase Price. Subject to the prorations and
-------------------------
adjustments provided for in this Agreement, the purchase price for the Assets
to be transferred to Buyer hereunder shall be THREE HUNDRED THOUSAND DOLLARS
($300,000.00), payable in full by Buyer to Seller at the Closing in cash or
Cash Equivalent.
3. Other Obligations of Buyer. It is expressly understood and agreed
--------------------------
that Buyer shall not be liable for any of the obligations or liabilities
of Seller of any kind and nature other than those specifically assumed by
Buyer under this Section 3.
(a) Assumption of Lease. Buyer agrees to assume the Lease from
-------------------
Seller as of the Closing, and at the Closing shall pay to Seller the security
deposit thereunder.
(b) Execution of New Lease. At the Closing, Buyer agrees to
----------------------
execute a new lease for the real property at 420 Irwindale Avenue, Azusa,
California in the form attached hereto as Exhibit "C."
(c) Sales and Use Taxes, Etc. Buyer shall pay all sales and use
------------------------
taxes arising out of the transfer of the Assets and shall pay its portion,
prorated as of the Closing Date, of state and local personal property taxes of
the Assets.
4. Representations and Warranties.
------------------------------
(a) Seller's Representations and Warranties. In addition to any
---------------------------------------
express agreements of Seller contained herein, the following constitute
representations and warranties of Seller and shall be true and correct as of
the Closing, and shall survive the Closing for a period of one year:
(i) Power. Seller has the legal power, right and authority to
-----
enter into this Agreement and the instruments referenced herein,
and to consummate the transactions contemplated hereby.
(ii) Requisite Action. All requisite corporate action has been
----------------
taken by Seller in connection with the entering into this
Agreement and the instruments referenced herein, and the
consummation of the transactions contemplated hereby.
(iii) Authority. The individuals executing this Agreement and
---------
the instruments referenced herein on behalf of the Seller have the
legal power, right and actual authority to bind Seller to the
terms and conditions herein and thereof.
2
<PAGE> 4
(iv) Title to Assets. Seller has good and marketable title to
---------------
all of the Assets, free and clear of all debts, claims, security
interests, liens, encumbrances and other title retention
agreements, pledges, assessments, covenants, restrictions and
charges of every nature, except as set forth in Exhibit "A".
(v) Litigation. There are no legal actions, arbitrations or
----------
other legal, administrative or governmental proceedings pending
or, to the knowledge of Seller, threatened against Seller or the
Assets which are reasonably likely to negatively affect the
transfer of the Assets as contemplated hereunder or Buyer's use
of the Assets following the Closing.
(vi) Environmental Matters. To the best of its knowledge,
---------------------
Seller has complied in all material respects with all federal,
state and local laws, statutes, rules and regulations relating to
the environment or to occupational health and safety (the
"Environmental Laws") applicable to the Assets. To the best of
knowledge of Seller, there is no pending or threatened civil or
criminal litigation, written notice of violation, formal
administrative proceeding, or investigation, inquiry or
information request by any governmental entity relating to any
Environmental Law involving the Assets.
(b) Buyer's Representations and Warranties. In addition to any
--------------------------------------
express agreements of Buyer contained herein, the following constitute
representations and warranties of Buyer and shall be true and correct as of
the Closing, and shall survive the Closing for a period of one year:
(i) Power. Buyer has the legal power, right and authority
-----
to enter into this Agreement and the instruments referenced
herein, and to consummate the transactions contemplated hereby.
(ii) Requisite Action. All requisite corporate action has
-----------------
been taken by Buyer in connection with the entering into this
Agreement and the instruments referenced herein, and the
consummation of the transactions contemplated hereby.
(iii) Authority. The individuals executing this Agreement
---------
and the instruments referenced herein on behalf of the Buyer
have the legal power, right and actual authority to bind Buyer
to the terms and conditions herein and thereof.
3
<PAGE> 5
5. Closing. The transfer of the Assets by Seller to Buyer (the
-------
Closing) shall take place at the offices of Argue Pearson Harbison & Myers, 801
S. Flower Street , Los Angeles, California at 9:00 a.m. local time, on
September 29, 1995 (the "Closing Date"), effective as of 11:59 p.m., September
30, 1995, or at such other time and place as the parties may agree to in
writing.
6. Conditions to the Closing.
-------------------------
(a) Conditions Precedent to Buyer's Obligations. The Closing and
-------------------------------------------
Buyer's obligations with respect to the transaction contemplated by this
Agreement are subject to:
(i) Buyer's investigation of the state of title to and the
condition of the Assets and Buyer's approval thereof based upon
Buyer's investigations, tests, survey(s) and studies (including,
title, zoning, building codes, environmental inspections, other
governmental regulations, architectural inspections, engineering
tests, economic feasibility studies and soils, seismic and
geological reports and review of all items delivered to Buyer by
Seller) with respect to the Assets as Buyer may elect to make or
obtain. The costs of all such investigations, tests, survey(s)
and studies conducted by Buyer shall be borne and paid by Buyer.
In the event Buyer elects to terminate this Agreement or if this
Agreement is otherwise terminated, Buyer agrees to deliver to
Seller all documents, records, plans, contracts or other items
which were delivered to Buyer by Seller. The preceding sentence
shall survive any termination of this Agreement. Buyer's failure
to disapprove such matters in writing on or prior to the Closing
Date shall be deemed approval thereof.
(ii) Seller's delivery of the items described in Section 7(a)
hereof, not later than the Closing Date (unless otherwise
provided).
(iii) The delivery of possession of the Assets to Buyer on
the Closing Date.
(iv) The timely performance by Seller on or before the Closing
Date of each and every undertaking and obligation of Seller under
this Agreement, including the covenants and agreements of Seller
hereunder, and all representations and warranties of Seller
hereunder being true on and as of the Closing Date.
4
<PAGE> 6
(v) The simultaneous closing of that certain Agreement of
Purchase and Sale of Assets by and between Decor Concepts, Inc.
and Buyer.
(vi) Due execution of the new lease, the form of which is
attached hereto as Exhibit "C".
(b) Conditions Precedent to Seller's Obligations. The Closing and
--------------------------------------------
Seller's obligations with respect to the transactions contemplated by this
Agreement are subject to:
(i) Buyer's delivery to Seller not later than the Closing
Date of the documents described in Section 7(b) and the purchase
price and other consideration in accordance with Section 2 of this
Agreement.
(ii) The timely performance by Buyer on or before the Closing
Date of each and every undertaking and obligation of Buyer under
this Agreement, including the covenants and agreements of Buyer
hereunder, and all representations and warranties of Buyer
hereunder being true on and as of the Closing Date.
(iii) The simultaneous closing of that certain Agreement of
Purchase and Sale of Assets by and between Decor Concepts, Inc.
and Buyer.
(iv) Due execution of the new lease, the form of which is
attached hereto as Exhibit "C".
(c) Failure of Conditions to Closing. In the event any of the
--------------------------------
conditions set forth in Section 6(a) or Section 6(b) are not timely satisfied
or are not waived, for a reason other than the material breach of Buyer or
Seller under this Agreement:
(i) This Agreement and the rights and obligations of Buyer
and Seller shall terminate, except as otherwise provided herein;
(ii) Each party shall return to the other any documents or
funds of the other party held by them.
7. Deliveries at Closing.
---------------------
(a) Seller's Deliveries. Seller hereby covenants and agrees to
-------------------
deliver or cause to be delivered to Buyer on or prior to the Closing Date the
following instruments and documents, the delivery of each of which shall be a
condition to the Closing:
5
<PAGE> 7
(i) Bill of Sale. A Bill of Sale ("Bill of Sale"), in the
------------
form attached hereto as Exhibit D, duly executed by Seller,
conveying to Buyer all of Seller's right, title and interest in
and to the Equipment.
(ii) Lease Assignment. An assignment of the Lease, properly
----------------
executed and acknowledged by Seller.
(iii) Proof of Authority. Such proof of Seller's authority
------------------
and authorization to enter into this Agreement and the
transactions contemplated hereby, and such proof of the power and
authority of the individual(s) executing and/or delivering any
instruments, documents or certificates on behalf of Seller to act
for and bind Seller as may reasonably be required by Buyer.
(b) Buyer's Deliveries. Buyer hereby covenants and agrees to
------------------
deliver to cause to be delivered to Seller on or prior to the Closing the
following funds, instruments and documents, the delivery of each of which
shall be a condition to the Closing:
(i) Purchase Price. The Purchase Price as required by
--------------
Section 2 of this Agreement.
(ii) Documents. Duly executed counterparts of the Bill of
---------
Sale and the Lease Assignment (evidencing Buyer's assumption
thereof in such form and substance as shall be reasonably
acceptable to Seller).
(iii) Proof of Authority. Such proof of Buyer's authority
------------------
and authorization to enter into this Agreement and the
transactions contemplated hereby, and such proof of the power and
authority of the individual(s) executing and/or delivering any
instruments, documents or certificates on behalf of Buyer to act
for and bind Buyer as may reasonably be required by Seller.
8. Bulk Sale. Buyer waives compliance with the provisions of the
---------
California Commercial Code relating to bulk transfers in connection with this
sale of assets. Nothing in this Section shall estop or prevent either Buyer or
Seller from asserting as a bar or defense to any action or proceeding brought
under that law that it does not apply to the sale contemplated under this
agreement.
9. Publicity. All notices to third parties (other than landlords) and
---------
all other publicity concerning the transactions contemplated by this agreement
shall be jointly planned and
6
<PAGE> 8
coordinated by and between Buyer and Seller. No party shall act unilaterally
in this regard without the prior written approval of the others; however, this
approval shall not be unreasonably withheld or delayed.
10 . Costs and Expenses. Each party shall pay all costs and expenses
------------------
incurred or to be incurred by it in negotiating and preparing this agreement
and in closing and carrying out the transactions contemplated by this
agreement.
11. Prorations.
----------
(a) General. Property taxes and assessments, and operating
-------
expenses and other expenses, if any, arising from or affecting the Assets
shall be prorated as of the Closing Date.
(b) Taxes and Assessments. All non-delinquent property taxes and
---------------------
assessments on the Assets shall be prorated based on the actual most recent
tax bill.
(c) Operating Expenses. All utility service charges for
------------------
electricity, heat and air conditioning service, other utilities, common area
maintenance, and other expenses incurred in connection with the Real Property
that Seller customarily pays, and any other costs incurred in the ordinary
course of business or the management and operation of the Assets, shall be
prorated on an accrual basis. Seller shall pay all such expenses that accrue
prior to the Closing Date and Buyer shall pay all such expenses accruing on
the Closing Date and thereafter.
(d) Method of Proration. Buyer and Seller agree to prepare a
-------------------
schedule of tentative adjustments within a reasonable time after the Closing,
but no later than thirty (30) days after the Closing in any event. Such
adjustments if and to the extent known and agreed upon shall be paid by Buyer
to Seller (if the prorations result in a net credit to the Seller) or by
Seller to Buyer (if the prorations result in a net credit to the Buyer) in
cash or Cash Equivalent.
12. Reserved.
--------
13. Reserved.
--------
14. Reserved.
--------
15. Reserved.
--------
16. Additional Representations of Seller.
------------------------------------
(a) Maintenance of the Assets. From and after the commencement of
-------------------------
discussions with Buyer regarding this transaction and through the Closing
Date, Seller has (i) operated, maintained
7
<PAGE> 9
and managed the Business in accordance with its present practices; and (ii)
discharged and complied with its obligations under the Lease to be assumed by
Buyer.
(b) Lease to be Assumed. From and after the commencement of
-------------------
discussions with Buyer regarding this transaction and through the Closing
Date, Seller has not amended, altered or modified the Lease in any material
way.
17. Notices. All notices or other communications required or permitted
-------
hereunder shall be in writing, shall be personally delivered (including by
means of professional messenger service), or telefaxed with subsequently
mailed confirmation or sent by certified mail, postage prepaid, return receipt
requested, or overnight delivery service, shall be deemed received upon the
date of receipt thereof, and shall be delivered to the parties at the
following addresses:
To Seller: DPD MANUFACTURING, INC.
5611 N. Peck Road
Arcadia, California 91006
Attn: Larry M. Daines or
Bruce DeBever
Telefax No.: (818) 444-4536
With a copy to: Argue Pearson Harbison & Myers
801 South Flower Street
Los Angeles, California 90017
Attn: Don M. Pearson or
Todd Daniel Beld
Telefax No.: (213) 622-7575
To Buyer: FALCON PRODUCTS, INC.
9387 Dielman Industrial Drive
St. Louis, Missouri 63132
Attn: Stephen L. Clanton
Telefax No.: (314) 991-9295
With a copy to: Gallop, Johnson & Neuman, L.C.
101 South Hanley Road, Suite 1600
St. Louis, Missouri 63105
Attn: Douglas J. Bates
Telefax No.: (314) 862-1219
Notice of change of address shall be given by written notice in the manner
detailed in this Section 17.
18. No Broker. Each party represents and warrants that it has dealt
---------
with no broker or finder in connection with any
8
<PAGE> 10
transaction contemplated by this agreement, and, as far as it knows, no broker
or other person is entitled to any commission or finder's fee in connection
with any of these transactions.
19. Required Actions of Buyer and Seller. Buyer and Seller agree to
------------------------------------
execute all such instruments and documents and to take all reasonably
necessary actions pursuant to the provisions hereof in order to consummate the
purchase and sale herein contemplated and shall use their commercially
reasonable efforts to accomplish the Closing in accordance with the provisions
hereof.
20. Entry and Approvals by Buyer.
----------------------------
(a) Entry. Prior to the Closing Date, Buyer and Buyer's
-----
representatives, agents and designees shall have the right, upon twenty-four
(24) hours' prior notice to Seller and during reasonable business hours, to
enter upon the Real Property, at Buyer's own cost, in connection with its
proposed purchase, development or operation of the Assets, including, without
limitations, the right to examine all books, records and files of Seller
relating to the Business and the right to make such inspections,
investigations and tests (including all mechanical systems) as Buyer may elect
to make or obtain. Seller agrees to make all such books, records and files
available to Buyer and Buyer's attorneys, accountants and other
representatives at any time on or prior to the Closing Date during reasonable
business hours upon twenty four (24) hours' prior notice from Buyer. Buyer
hereby indemnifies Seller and holds it forever harmless from any and all
claims, demands, liabilities, costs, expenses, penalties, damages and losses
(including, without limitation, actual attorneys' fees) arising out of such
entry. The preceding sentence shall survive any termination of this Agreement
and the Closing.
(b) Approvals. As a material inducement to the execution and
---------
delivery of this Agreement by Seller and the performance by Seller of its
duties and obligations hereunder, Buyer does hereby acknowledge, represent,
warrant and agree that, as of the Closing, except as otherwise expressly
provided herein (i) Buyer is purchasing the Assets in an "AS IS" condition
with respect to any facts, circumstances, conditions and defects of all kinds,
including without limitation, with respect to the existence of any hazardous
or toxic substances as defined under local, state or federal law; (ii) Seller
has no obligation to repair or correct any such facts, circumstances,
conditions or defects or compensate Buyer for same; (iii) based upon all
physical inspections, examinations and tests of the Real Property as Buyer
deems necessary or appropriate under the circumstances, Buyer is and will be
relying strictly and solely upon such inspections and examinations and the
advice and counsel of its own agents and officers and the Buyer is and will be
fully satisfied that the purchase price and consideration is fair and adequate
consideration for the Assets; (iv) Seller is not making and has not made any
9
<PAGE> 11
warranty or representation with respect to the physical condition of all or
any part of the Assets as an inducement to the Buyer to purchase the Assets or
for any other purpose, except as otherwise expressly stated herein; and (v) by
reason of all of the foregoing, Buyer shall assume the full risk of any loss
or damage occasioned by any fact, circumstance, condition or defect pertaining
to the physical condition of the Assets which is capable of being observed or
ascertained, except as otherwise expressly stated herein. EXCEPT AS OTHERWISE
PROVIDED OR LIMITED BY THE TERMS OF THIS AGREEMENT, BUYER ACKNOWLEDGES AND
AGREES THAT THIS SALE AND ASSIGNMENT IS MADE "AS IS" AND "WHERE IS," WITHOUT
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION, IMPLIED WARRANTIES OF SUITABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE OF MERCHANTABILITY OR ANY OTHER WARRANTIES WHATSOEVER CONTAINED IN OR
CREATED BY CALIFORNIA CODES OR OTHERWISE.
21. Reserved.
--------
22. Assignment. Buyer shall not assign, transfer or convey its rights
----------
and obligations under this Agreement or in the Assets without the prior
written consent of Seller, which consent may be withheld at Seller's sole
discretion. Notwithstanding the foregoing, Buyer shall have a one (1) time
right to assign its rights and obligations under this Agreement without
consent of Seller to any person or entity controlling, controlled by or under
common control with Buyer. Any permitted assignee shall succeed to all the
rights and remedies hereunder. Notwithstanding the foregoing, no such
assignment shall relieve the assigning party from its liability under this
Agreement.
23. Miscellaneous.
-------------
(a) Indemnities. Seller shall indemnify Buyer against and hold
-----------
Buyer harmless from, all losses, damages, costs and expenses (including,
without limitation, reasonable legal fees and disbursements) that are not
attributable to the Buyer or specifically assumed by Buyer hereunder and which
are incurred as a result of the liabilities which arise or result from acts,
occurrences or matters that took place prior to the Closing. Buyer shall
indemnify Seller against and hold Seller harmless from, all losses, damages,
costs and expenses (including, without limitation, reasonable legal fees and
disbursements) that are not attributable to Seller and which are incurred as a
result of the liabilities which arise or result from acts, occurrences or
matters arising in connection with the Business and that take place after the
Closing.
(b) Partial Invalidity. If any term or provision of this Agreement
------------------
or the application thereof to any person or circumstances shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which
10
<PAGE> 12
it is held invalid or unenforceable, shall not be affected thereby, and each
such term and provision of this Agreement shall be valid and be enforced to
the greatest extent permitted by law.
(c) Waivers. No waiver of any breach of any covenant or provision
-------
herein contained shall be deemed a waiver of any preceding or succeeding
breach thereof, or of any other covenant or provision herein contained. No
extension of time for performance of any obligation or act shall be deemed an
extension of the time for performance of any other obligation or act.
(d) Successors and Assigns. This Agreement shall be binding upon
----------------------
and shall inure to the benefit of the successors and permitted assigns of the
parties hereto.
(e) Professional Fees. In the event of the bringing of any action
-----------------
or suit by a party hereto against another party hereunder by reason of any
breach of any of the covenants, agreements or provisions on the part of the
other party arising out of this Agreement, then in that event the prevailing
party shall be entitled to have and recover of and from the other party all
costs and expenses of the action or suit, including actual attorneys' fees at
trial and post-judgment including appeals, accounting and engineering fees and
any other professional fees resulting therefrom.
(f) Entire Agreement. This Agreement (including all Exhibits
----------------
attached hereto) is the final expression of, and contains the entire agreement
between, the parties with respect to the subject matter hereof and supersedes
all prior understandings with respect thereto. This Agreement may not be
modified, changed, supplemented or terminated, nor may any obligations
hereunder be waived, except by written instrument signed by the party to be
charged or by its agent duly authorized in writing or as otherwise expressly
permitted herein. The parties do not intend to confer any benefit hereunder on
any person, firm or corporation other than the parties hereto.
(g) Time of Essence. Seller and Buyer acknowledge and agree that
---------------
time is strictly of the essence with respect to each and every term,
condition, obligation and provision hereof and that failure to timely perform
any of the terms, conditions, obligations or provisions hereof by either party
shall constitute a material breach of and a non-curable (but waivable) default
under this Agreement by the party so failing to perform.
(h) Construction. Headings at the beginning of each paragraph and
------------
subparagraph are solely for the convenience of the parties and are not a part
of the Agreement. Whenever required by the context of this Agreement, the
singular shall include the plural and the masculine shall include the feminine
and vice versa. This Agreement shall not be construed as if it has been
prepared by
11
<PAGE> 13
one of the parties, but rather as if both parties had prepared the same.
Unless otherwise indicated, all references to paragraphs and subparagraphs are
to this Agreement. In the event the date on which Buyer or Seller is required
to take any action under the terms of this Agreement is not a business day,
the action shall be taken on the next succeeding business day.
(i) Survival. Unless otherwise expressly provided herein, all
--------
representations, warranties and covenants (to the extent such covenants are
not fully performed or rendered moot by the Closing) shall survive the
Closing.
(j) Exhibits. The Exhibits to this Agreement are an integral part
--------
of this Agreement and are incorporated herein by reference. If any of the
Exhibits hereto are not attached at the time of execution hereof, the
preparation and attachment of such Exhibits in form mutually satisfactory to
the parties shall be an additional condition to the Closing. The parties agree
to negotiate the terms and definitive language of such Exhibits in good faith,
and to use their respective best efforts in connection therewith.
(l) Counterparts. This Agreement may be executed in an original
------------
and any number of counterparts, each of which shall be deemed to be an
original of one and the same instrument.
12
<PAGE> 14
(m) Governing Law. This Agreement shall be construed according to
-------------
and governed by the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year hereinbefore written.
DPD MANUFACTURING, INC.
By: /s/ Larry M. Daines
---------------------------------
Larry M. Daines, President
FALCON PRODUCTS, INC.
By: /s/ Stephen L. Clanton
---------------------------------
Stephen L. Clanton,
Executive Vice President
and Chief Financial Officer
13
<PAGE> 1
AGREEMENT OF PURCHASE AND SALE
OF ASSETS
by and between
DECOR CONCEPTS, INC.,
("Seller")
and
FALCON PRODUCTS, INC.
("Buyer")
<PAGE> 2
AGREEMENT OF PURCHASE AND SALE
OF ASSETS
THIS AGREEMENT OF PURCHASE AND SALE OF ASSETS ("Agreement") is made
and entered into as of the 29th day of September, 1995, by and between
DECOR CONCEPTS, INC., a California corporation ("Seller"), and FALCON
PRODUCTS, INC., a Delaware corporation ("Buyer").
RECITALS AND CERTAIN DEFINITIONS
--------------------------------
A. Buyer desires to purchase from Seller and Seller desires to sell
to Buyer, on the terms and subject to the conditions of this Agreement,
certain inventory, equipment and other assets of Seller in exchange for
the cash and other consideration of Buyer described herein.
B. For purposes of this Agreement, the terms set forth below shall have
the following meanings:
"ASSETS" means, collectively, the Inventory, the Shop Equipment, the
Office Equipment, the General Intangibles and the Permits.
"BILL OF SALE" is defined in Section 7(a)(i).
"BUSINESS" means Seller's business of producing restaurant seating
and interior decor products. The "Business" does not include any of
Seller's operations relating to playground products.
"CASH EQUIVALENT" means a wire transfer of funds or other good and
immediately available funds.
"CLOSING" means the closing at which the transfer of the Assets shall
take place as provided herein.
"CLOSING DATE" is defined in Section 5.
"CONTRACTS" means those service contracts, management contracts and
other arrangements relating to the Assets and identified on Exhibit "D"
attached hereto, together with all supplements, amendments and modifications
thereto.
"EMPLOYEES" means all employees of Seller performing services
exclusively in connection with the Business as of the Closing Date.
"GENERAL ASSIGNMENT" is defined in Section 7(a)(ii).
"GENERAL INTANGIBLES" means all rights, title and interest in and
to all intangible property rights pertaining solely to the Business,
including all (a) patents and patent applications, (b) all of Seller's
rights to the name Decor or Decor Concepts, (c)
<PAGE> 3
electronically stored data, (d) trade secrets and confidential business
information, inventions, know-how, manufacturing and production processes
and techniques, marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and information,
(e) all books, records and accounts, production records, technical,
manufacturing and procedural manuals, advertising and promotional materials,
vendor information, employment records, studies, reports or summaries
relating to any environmental conditions or consequences of any operation,
present or former, (f) all rights of Seller under express or implied
warranties from suppliers to Seller with respect to the Inventory, Office
Equipment, and Shop Equipment to be transferred hereunder, (g) all rights
of Seller to receive any refund of any deposit made under the Leases or the
Contracts, and (h) copies of tangible embodiments of any type of the foregoing,
owned or used by Seller in connection with the Business.
"INVENTORY" means all inventories of raw materials, work in process,
components, sub-assemblies, packaging materials, spare parts and similar
items of Seller used by Seller in connection with the Business and which
exist on the Closing Date. "Inventory" does not include finished goods, which
---
Seller will sell to its existing customers solely for its own account,
after the Closing.
"LEASES" means those leases to be assumed by and assigned to Buyer
hereunder.
"OFFICE EQUIPMENT" means that certain office equipment utilized by
Seller in the Business as listed on Exhibit "A" attached hereto.
"PERMITS" means those certain permits, licenses and governmental
approvals utilized by Seller in the Business as listed on Exhibit "B"
attached hereto.
"REAL PROPERTY" means the real property leased to Seller as listed
on Exhibit "C" attached hereto.
"SHOP EQUIPMENT" means all of the plant, machinery, equipment, tools,
tooling, dyes, production fixtures, maintenance machinery and equipment
owned and used by Seller in connection with the Business as set forth on
Exhibit "E-1," and excepting therefrom that property set forth on Exhibit
"E-2" attached hereto.
"TRANSITION PERIOD" means the period of time beginning on the Closing
Date and ending on the date of the commencement of the new lease to be
executed by Buyer at Closing, the form of which is attached hereto as
Exhibit "I."
2
<PAGE> 4
The terms of this Agreement are as follows:
1. Purchase and Sale. Seller agrees to sell to Buyer, and Buyer
-----------------
agrees to purchase from Seller, the Assets upon the terms and conditions
set forth in this Agreement.
2. Payment of Purchase Price. Seller and Buyer jointly and in good
-------------------------
faith estimate the amount to be paid with respect to the Assets as
determined in accordance with Section 3 of this Agreement and as such amount
may be increased or decreased as a result of the net effect of the payments
to be made under Section 11 hereof to be $795,000.00. Such estimated
Purchase Price shall be paid by Buyer to Seller at the Closing in cash or
Cash Equivalent. Promptly after the Closing as of the close of Business on
September 29, 1995 Seller and Buyer shall conduct a physical count of the
Inventory, and shall prepare a final schedule of prorations. Based thereon,
the Purchase Price shall be adjusted and Buyer shall pay to Seller, or
Seller shall pay to Buyer, as the case may be, the aggregate amount of such
adjustment in cash or Cash Equivalent. Interest shall accrue at 9% per annum
after 30 days after the Closing Date.
3. Determination of Purchase Price; Allocation.
-------------------------------------------
(a) Purchase Price. Subject to the prorations and adjustments
--------------
provided for in this Agreement, the aggregate consideration for the Assets
(the "Purchase Price") shall be equal to the sum of the amounts determined
pursuant to Sections 3(a)(i) through 3(a)(iii) below:
(i) Eighty five percent (85%) of the total value of the
Inventory, as determined in accordance with generally accepted accounting
principles and consistent with past practice; notwithstanding GAAP accounting,
there shall not be a deduction for obsolete, slow-moving or defective inventory
as that has been accounted for through the 15% discount;
(ii) One hundred percent (100%) of the original acquisition
cost of the Office Equipment, less accumulated depreciation; and
(iii) Two Hundred Fifty Thousand Dollars ($250,000).
(b) Allocation of Purchase Price. The Purchase Price shall be
----------------------------
allocated to the respective categories of Assets as set forth on Exhibit "F".
For Federal income tax purposes, Buyer and Seller shall and shall cause their
respective affiliates to, report the transaction contemplated by this
Agreement in a manner consistent with such allocation. Neither Buyer nor
Seller shall nor shall they permit their respective affiliates to, file at
any time any return or other document, publish any report or other
3
<PAGE> 5
document or take any other action which is inconsistent with the allocations
specified in Exhibit "F".
(c) Assumption of Liabilities. At Closing, Buyer shall assume
-------------------------
Seller's liabilities and obligations with respect to the Leases and Contracts
(except as set forth in (ii) below), including performance of all customer
purchase contracts other than those applicable to finished goods inventory
existing at the Closing Date, all accrued vacation and accrued sick pay to the
Employees as of the Closing Date, all sales and use tax arising from this
transaction, any and all claims by purchasers or third parties with respect
to goods shipped by Buyer after the Closing Date for the account of Buyer, and
all expenses and obligations of operating the Business after the Closing Date,
including the hiring of all Employees through the WARN Notice Date and all
expenses and obligations of operating the Business after the Closing Date,
as more fully set forth on Exhibit "G". Other than as set forth in the
preceding sentence or in Exhibit "G." Buyer shall not assume, or take title
to the Assets subject to, or in any way be liable, obligated or responsible
for any liabilities or obligations of Seller, including without limitation,
(i) any liability to any vendor of Seller for goods delivered or services
rendered prior to Closing, (ii) any liability or obligation of Seller existing
at or arising after the Closing under any Lease or Contract which results
from the breach or wrongful action or inaction of Seller prior to the Closing,
(iii) any liability or obligation of Seller in respect of any plan, agreement,
arrangement or understanding under which benefits or employment is provided
to any person, or (iv) any tax liability, including sales and use tax, accruing
prior to the Closing; all of which Seller shall pay, discharge and satisfy
as and when due and payable.
4. Representations and Warranties.
------------------------------
(a) Seller's Representations and Warranties. In addition to any
---------------------------------------
express agreements of Seller contained herein, the following constitute
representations and warranties of Seller and shall be true and correct as of
the Closing, and shall survive the Closing for a period of one year:
(i) Power. Seller has the legal power, right and authority
-----
to enter into this Agreement and the instruments referenced herein,
and to consummate the transactions contemplated hereby.
(ii) Requisite Action. All requisite corporate action has
----------------
been taken by Seller in connection with the entering into this
Agreement and the instruments referenced herein, and the consummation
of the transactions contemplated hereby.
4
<PAGE> 6
(iii) Authority. The individuals executing this Agreement and
---------
the instruments referenced herein on behalf of the Seller have the
legal power, right and actual authority to bind Seller to the terms
and conditions herein and thereof.
(iv) Title to Assets. Seller has good and marketable title to
---------------
all of the Assets, free and clear of all debts, claims, security
interests, liens, encumbrances and other title retention agreements,
pledges, assessments, covenants, restrictions and charges of every
nature, except as set forth in Exhibit "H".
(v) Litigation. There are no legal actions, arbitrations or
----------
other legal, administrative or governmental proceedings pending or,
to the knowledge of Seller, threatened against Seller or the Assets
which are reasonably likely to negatively affect the transfer of the
Assets as contemplated hereunder or Buyer's use of the Assets
following the Closing.
(vi) Environmental Matters. To the best of its knowledge,
---------------------
Seller has complied in all material respects with all federal, state
and local laws, statutes, rules and regulations relating to the
environment or to occupational health and safety (the "Environmental
Laws") applicable to the Assets or the Business. There is no pending
or, to the best of knowledge of Seller, threatened civil or criminal
litigation, written notice of violation, formal administrative
proceeding, or investigation, inquiry or information request by any
governmental entity relating to any Environmental Law involving the
Assets or the Business.
(b) Buyer's Representations and Warranties. In addition to any
--------------------------------------
express agreements of Buyer contained herein, the following constitute
representations and warranties of Buyer and shall be true and correct as of
the Closing and shall survive the Closing for a period of one year:
(i) Power. Buyer has the legal power, right and authority to
-----
enter into this Agreement and the instruments referenced herein, and
to consummate the transactions contemplated hereby.
(ii) Requisite Action. All requisite corporate action has
----------------
been taken by Buyer in connection with the entering into this
Agreement and the instruments referenced herein, and the
5
<PAGE> 7
consummation of the transactions contemplated hereby.
(iii) Authority. The individual executing this Agreement and
---------
the instruments referenced herein on behalf of Buyer have the legal
power, right and actual authority to bind Buyer to the terms and
conditions hereof and thereof.
5. Closing. The Closing shall take place at the offices of Argue Pearson
-------
Harbison & Myers, 801 S. Flower Street, Los Angeles, California at 11:00 a.m.
local time, on September 29, 1995 (the "Closing Date"), effective as of the
close of business on September 29, 1995, or at such other time and place as
the parties may agree to in writing.
6. Conditions to the Closing.
-------------------------
(a) Conditions Precedent to Buyer's Obligations. The Closing, and
-------------------------------------------
Buyer's obligations with respect to the transaction contemplated by this
Agreement, are subject to:
(i) Seller's delivery of the items described in Sections 7(a)
hereof, not later than the Closing Date (unless otherwise provided).
(ii) The delivery of possession of the Assets to Buyer on the
Closing Date.
(iii) The timely performance by Seller on or before the Closing
Date of each and every undertaking and obligation of Seller under this
Agreement, including the covenants and agreements of Seller hereunder,
and all representations and warranties of Seller hereunder being true
on and as of the Closing Date.
(iv) The simultaneous closing of that certain Agreement of
Purchase and Sale of Assets by and between DPD Manufacturing, Inc.
and Buyer.
(v) Due execution of the new lease, the form of which is
attached hereto as Exhibit "I."
(b) Conditions Precedent to Seller's Obligations. The Closing, and
--------------------------------------------
Seller's obligations with respect to the transactions contemplated by this
Agreement, are subject to:
(i) Buyer's delivery to Seller not later than the Closing
Date of the documents described in Section 7(b) and the estimated
Purchase Price in accordance with Sections 2 and 3 of this Agreement.
6
<PAGE> 8
(ii) The timely performance by Buyer on or before the Closing
Date of each and every undertaking and obligation of Buyer under this
Agreement, including the covenants and agreements of Buyer hereunder,
and all representations and warranties of Buyer hereunder being true
on and as of the Closing Date.
(iii) The ability of Seller to obtain such written consents of
the lessors as are required by the Leases.
(iv) The simultaneous closing of that certain Agreement of
Purchase and Sale of Assets by and between DPD Manufacturing, Inc.
and Buyer.
(v) Due execution of the new lease, the form of which is
attached hereto as Exhibit "I."
(c) Failure of Conditions to Closing. In the event any of the
--------------------------------
conditions set forth in Section 6(a) or Section 6(b) are not timely satisfied
or are not waived, for a reason other than the material breach of Buyer or
Seller under this Agreement:
(i) This Agreement and the rights and obligations of Buyer
and Seller shall terminate, except as otherwise provided herein;
(ii) Each party shall return to the other any documents or
funds of the other party held by them.
7. Deliveries at Closing.
---------------------
(a) Seller's Deliveries. Seller hereby covenants and agrees to
-------------------
deliver or cause to be delivered to Buyer on or prior to the Closing Date the
following instruments and documents, the delivery of each of which shall be a
condition to the Closing:
(i) Bill of Sale. A Bill of Sale ("Bill of Sale") duly
------------
executed by Seller, conveying to Buyer all of Seller's right, title
and interest in and to the Inventory, the Shop Equipment and the
Office Equipment, in such form and substance as shall be reasonably
acceptable to Buyer.
(ii) General Assignment. An assignment ("General Assignment"),
------------------
duly executed by Seller, assigning to Buyer all of Seller's right,
title and interest in and to the Contracts, the General Intangibles,
and the Permits in such form and substance as shall be reasonably
acceptable to Buyer.
7
<PAGE> 9
(iii) Lease Assignments. Assignments of all leaseholds of
-----------------
Seller (except for those premises identified in the new lease
attached hereto as Exhibit "I"), properly executed and acknowledged
by Seller in such form as shall be reasonably acceptable to Buyer.
(iv) Proof of Authority. Such proof of Seller's authority and
------------------
authorization to enter into this Agreement and the transactions
contemplated hereby, and such proof of the power and authority of the
individual(s) executing and/or delivering any instruments, documents
or certificates on behalf of Seller to act for and bind Seller as
reasonably may be required by Buyer.
(v) Motor Vehicle Title. A motor vehicle title, duly endorsed
-------------------
by Seller, conveying to Buyer all of the right, title and interest in
and to the fiberglass van truck.
(b) Buyer's Deliveries. Buyer hereby covenants and agrees to deliver
------------------
or cause to be delivered to Seller on or prior to the Closing the following
funds, instruments and documents, the delivery of each of which shall be a
condition to the Closing:
(i) Purchase Price. The estimated Purchase Price as required
--------------
by Sections 2 and 3 of this Agreement.
(ii) Documents. The duly executed lease required by Sections
---------
6(a)(v) and 6(b)(v) of this Agreement, and duly executed counterparts
of the Lease Assignments (evidencing Buyer's assumption thereof in
such form and substance as shall be reasonably acceptable to Seller),
the General Assignment and the Bill of Sale.
(iii) Proof of Authority. Such proof of Buyer's authority and
------------------
authorization to enter into this Agreement and the transactions
contemplated hereby, and such proof of the power and authority of the
individual(s) executing and/or delivering any instruments, documents
or certificates on behalf of Buyer to act for and bind Buyer as
reasonably may be required by Seller.
8. Bulk Sale. Buyer waives compliance with the provisions of the
---------
California Commercial Code relating to bulk transfers in connection with this
sale of assets. Nothing in this Section shall estop or prevent either Buyer or
Seller from asserting as a bar or defense to any action or proceeding brought
8
<PAGE> 10
under that law that it does not apply to the sale contemplated under this
Agreement.
9. Publicity. All notices to third parties (other than landlords) and
---------
all other publicity concerning the transactions contemplated by this Agreement
shall be jointly planned and coordinated by and between Buyer and Seller. No
party shall act unilaterally in this regard without the prior written approval
of the others; however, this approval shall not be unreasonably withheld or
delayed.
10. Costs and Expenses. Each party shall pay all costs and expenses
------------------
incurred or to be incurred by it in negotiating and preparing this Agreement
and in closing and carrying out the transactions contemplated by this
Agreement.
11. Prorations and Credits.
----------------------
(a) General. Property taxes and assessments, and operating expenses
-------
and other expenses, if any, arising from or affecting the Assets shall be
prorated as of the Closing Date.
(b) Taxes and Assessments. All non-delinquent property taxes and
---------------------
assessments on the Assets shall be prorated based on the actual most recent
tax bill.
(c) Operating Expenses. All utility service charges for electricity,
------------------
heat and air conditioning service, other utilities, common area maintenance,
and other expenses incurred in operating the Assets that Seller customarily
pays, and any other costs incurred in the ordinary course of business or the
management and operation of the Assets, shall be prorated on an accrual basis.
Except as provided in Section 12 hereof, Seller shall pay all such expenses
that accrue prior to the Closing Date and Buyer shall pay all such expenses
accruing on the Closing Date and thereafter.
(d) Contracts. Amounts payable under the Contracts shall be
---------
prorated on an accrual basis. Seller shall pay all amounts due thereunder which
accrue prior to the Closing and Buyer shall pay all amounts accruing on the
Closing and thereafter.
(e) Method of Proration. Buyer and Seller agree to prepare a
-------------------
schedule of tentative adjustments prior to thirty days after Closing. Such
adjustments, if and to the extent known and agreed upon, shall be paid by
Buyer to Seller (if the prorations result in a net credit to the Seller) or
by Seller to Buyer (if the prorations result in a net credit to the Buyer) in
cash or Cash Equivalent.
(f) Credit for Accrued Vacation and Sick Pay. Buyer shall receive
----------------------------------------
a credit at Closing in an amount equal to the sum of
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<PAGE> 11
accrued vacation and sick pay obligations assumed by Buyer at Closing.
12. Transition Period. It is acknowledged and agreed that, during the
-----------------
Transition Period, Buyer's employees shall have reasonable access to the Rel
Property located at 5525, 5537, 5611 and 5623 N. Peck Road (the "Jointly-Shared
Space") and may conduct Buyer's operations thereat. Buyer shall pay or
reimburse Seller for all rent (in accordance with the terms of the Leases and
at the rate of $6,600 per month on a triple net basis for each of 5537 North
Peck Road and 5611 North Peck Road), electricity, water and gas charges
incurred during the Transition Period at the Jointly-Shared Space, and the
parties shall further allocate telephone costs and other cost items incurred
during the Transition Period at the Jointly-Shared Space based on actual
usage of the same by the respective parties, or as otherwise agreed by the
parties. Seller shall make available to Buyer, at Seller's cost and expense,
members of Seller's staff to assist the staff of Buyer in making transition
in such areas as accounting, sales, coordination, pricing and management.
During the Transition Period, Seller and Buyer each agree to fully
cooperate with each other in effecting the transition and in carrying out the
interests of Buyer in the operation of the Business and in carrying out the
interests of Seller in the operation of the playground business.
After the Closing, Buyer shall have the right to the name "Decor
Concepts, Inc.," and Seller shall change its name within a reasonable time
period after Closing. During the Transition Period, Seller may continue to
use the name in connection with business predating the Closing Date, and
thereafter in connection with the disposition of finished goods inventory
existing at the Closing Date.
Seller hereby acknowledges that the parties intend to transfer the
Assets to Buyer without interruption in the business in which the Assets are
presently engaged, and that various consents to the transfer to Buyer of
Seller's rights under certain Contracts, Leases, and Permits ("Agreements")
may not be completed prior to the Closing. Thus, Seller agrees to maintain such
Agreements and, at Buyer's request, and at Buyer's cost, any insurance policies
related thereto, in full power and effect for the benefit of Buyer, during the
Transition Period and to permit Buyer, at Buyer's option, to utilize the
benefit of such Agreements, insurance policies and performance bonds until
such consents are obtained. While any Permits are being assigned, Seller shall
have the full right to operate thereunder.
13. Commissions During Transition Period. Buyer agrees to pay Seller
------------------------------------
commissions (consistent with the practices of Seller in effect from time to
time) due to any associate of Seller for any
10
<PAGE> 12
open sales accruing to the benefit of Buyer generated by account executives of
Seller prior to or after the Closing Date.
14. Post-Closing Access to Books, Etc. From and after the Closing, each
----------------------------------
party shall have the right, directly or through a representative, to examine
any and all books and records that the other party may have relating to the
Assets or the Business provided that such examination occurs during regular
business hours and upon reasonable notice and provided further that it is
solely for the purpose of obtaining information: (i) for reporting to tax and
other governmental authorities, (ii) to assist such party in pursuing or
defending any claim, or (iii) to assist such party in the performance of any
of its continuing obligations hereunder.
15. Reserved.
--------
16. Additional Representations of Seller.
-----------------------------------
(a) Maintenance of the Assets. From and after the commencement of
-------------------------
discussions with Buyer regarding this transaction and through the Closing Date,
Seller has (i) operated, maintained and managed the Business in accordance
with its present practices; and (ii) discharged and complied with its
obligations under the Contracts, Permits and the Leases.
(b) Contracts and Leases to be Assumed. From and after the
----------------------------------
commencement of discussions with Buyer regarding this transaction and through
the Closing Date, Seller has not amended, altered or modified in any material
way any of the Contracts or the Leases, except as disclosed to Buyer in
writing.
17. Notices. All notices or other communications required or permitted
-------
hereunder shall be in writing, shall be personally delivered (including by
means of professional messenger service), or telefaxed with subsequently
mailed confirmation or sent by certified mail, postage prepaid, return
receipt requested, or overnight delivery service, shall be deemed received
upon the date of receipt thereof, and shall be delivered to the parties at
the following addresses:
To Seller: DECOR CONCEPTS, INC.
5611 N. Peck Road
Arcadia, California 91006
Attn: Bruce DeBever
Telefax No. (818) 444-4536
With a copy to: Corporate Secretary
Rubbermaid Incorporated
1147 Akron Road
Wooster, Ohio 44691-6000
Telefax No.: (216) 287-2340
11
<PAGE> 13
With a copy to: Argue Pearson Harbison & Myers
801 South Flower Street
Los Angeles, California 90017
Attn: Don M. Pearson or
Todd Daniel Beld
Telefax No.: (213) 622-7575
To Buyer: FALCON PRODUCTS, INC.
9387 Dielman Industrial Drive
St. Louis, Missouri 63132
Attn: Stephen L. Clanton
Telefax No.: (314) 991-9295
With a copy to: Gallop, Johnson & Neuman, L.C.
101 South Hanley Road, Suite 1600
St. Louis, Missouri 63105
Attn: Douglas J. Bates
Telefax No.: (314) 862-1219
Notice of change of address shall be given by written notice in the manner
detailed in this Section 17.
18. No Broker. Each party represents and warrants that it has dealt with
---------
no broker or finder in connection with any transaction contemplated by this
Agreement, and, as far as it knows, no broker or other person is entitled to
any commission or finder's fee in connection with any of these transactions.
19. Required Actions of Buyer and Seller. Buyer and Seller agree to
------------------------------------
execute all such instruments and documents and to take all reasonably necessary
actions pursuant to the provisions hereof in order to consummate the purchase
and sale herein contemplated and shall use their commercially reasonable
efforts to accomplish the Closing in accordance with the provisions hereof.
20. Entry and Approvals by Buyer.
----------------------------
(a) Entry. Prior to the Closing Date, Buyer and Buyer's representa-
-----
tives, agents and designees shall have the right, upon twenty-four (24) hours'
prior notice to Seller and during reasonable business hours, to enter upon the
Real Property, at Buyer's own cost, in connection with its proposed purchase,
development or operation of the Assets, including, without limitations, the
right to examine all books, records and files of Seller relating to the
Business and the right to make such inspections, investigations and tests
(including all mechanical systems) as Buyer may elect to make or obtain.
Seller agrees to
12
<PAGE> 14
make all such books, records and files available to Buyer and Buyer's
attorneys, accountants and other representatives at any time on or prior to
the Closing Date during reasonable business hours upon twenty four (24) hours'
prior notice from Buyer. Buyer hereby indemnifies Seller and holds it forever
harmless from any and all claims, demands, liabilities, costs, expenses,
penalties, damages and losses (including, without limitation, actual attorneys'
fees) arising out of such entry. The preceding sentence shall survive any
termination of this Agreement and the Closing.
(b) Approvals. As a material inducement to the execution and
---------
delivery of this Agreement by Seller and the performance by Seller of its
duties and obligations hereunder, Buyer does hereby acknowledge, represent,
warrant and agree that, as of the Closing, except as otherwise expressly
provided herein (i) Buyer is purchasing the Assets in an "AS IS" condition
with respect to any facts, circumstances, conditions and defects of all kinds,
including without limitation, with respect to the existence of any hazardous
or toxic substances as defined under local, state or federal law; (ii) Seller
has no obligation to repair or correct any such facts, circumstances,
conditions or defects or compensate Buyer for same; (iii) based upon all
physical inspections, examinations and tests of the Real Property as Buyer
deems necessary or appropriate under the circumstances, Buyer is and will be
relying strictly and solely upon such inspections and examinations and the
advice and counsel of its own agents and officers and the Buyer is and will
be fully satisfied that the purchase price and consideration is fair and
adequate consideration for the Assets; (iv) Seller is not making and has not
made any warranty or representation with respect to the physical condition
of all or any part of the Assets as an inducement to the Buyer to purchase
the Assets or for any other purpose, except as otherwise expressly stated
herein; and (v) by reason of all of the foregoing, Buyer shall assume the full
risk of any loss or damage occasioned by any fact, circumstance, condition
or defect pertaining to the physical condition of the Assets which is capable
of being observed or ascertained, except as otherwise expressly stated herein.
EXCEPT AS OTHERWISE PROVIDED OR LIMITED BY THE TERMS OF THIS AGREEMENT, BUYER
ACKNOWLEDGES AND AGREES THAT THIS SALE AND ASSIGNMENT IS MADE "AS IS" AND
"WHERE IS," WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION, IMPLIED WARRANTIES OF SUITABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE OF MERCHANTABILITY OR ANY OTHER WARRANTIES WHATSOEVER
CONTAINED IN OR CREATED BY CALIFORNIA CODES OR OTHERWISE.
21. Reserved.
--------
22. Assignment. Buyer shall not assign, transfer or convey its rights
----------
and obligations under this Agreement or in the Assets without the prior
written consent of Seller, which consent may be withheld at Seller's sole
discretion. Notwithstanding the
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<PAGE> 15
foregoing, Buyer shall have a one (1) time right to assign its rights and
obligations under this Agreement without consent of Seller to any person or
entity controlling, controlled by or under common control with Buyer. Any
permitted assignee shall succeed to all the rights and remedies hereunder.
Notwithstanding the foregoing, no such assignment shall relieve the assigning
party from its liability under this Agreement.
23. Miscellaneous.
-------------
(a) Indemnities. Seller shall indemnify Buyer against and hold
-----------
Buyer harmless from, all losses, damages, costs and expenses (including,
without limitation, reasonable legal fees and disbursements) that are not
attributable to the Buyer or specifically assumed by Buyer hereunder and
which are incurred as a result of the liabilities which arise or result from
acts, occurrences or matters that took place prior to the Closing. Buyer
shall indemnify Seller against and hold Seller harmless from, all losses,
damages, costs and expenses (including, without limitation, reasonable legal
fees and disbursements) that are not attributable to Seller and which are
incurred as a result of the liabilities which arise or result from acts,
occurrences or matters arising in connection with the Business and that take
place after the Closing, specifically including all post-closing obligations
under leases assumed by Buyer and specifically including any and all claims
by purchaser or third parties with respect to goods shipped by Buyer after
the Closing Date.
(b) Partial Invalidity. If any term or provision of this Agreement
------------------
or the application thereof to any person or circumstances shall, to any extent,
be invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each such term and provision of this Agreement shall be valid and
be enforced to the greatest extent permitted by law.
(c) Waivers. No waiver of any breach of any covenant or provision
-------
herein contained shall be deemed a waiver of any preceding or succeeding
breach thereof, or of any other covenant or provision herein contained. No
extension of time for performance of any obligation or act shall be deemed
an extension of the time for performance of any other obligation or act.
(d) Successors and Assigns. This Agreement shall be binding upon
----------------------
and shall inure to the benefit of the successors and permitted assigns of the
parties hereto.
(e) Professional Fees. In the event of the bringing of any action
-----------------
or suit by a party hereto against another party hereunder by reason of any
breach of any of the covenants, agreements or provisions on the part of the
other party arising out
14
<PAGE> 16
of this Agreement, then in that event the prevailing party shall be entitled
to have and recover of and from the other party all costs and expenses of the
action or suit, including actual attorneys' fees at trial and post-judgment
including appeals, accounting and engineering fees and any other professional
fees resulting therefrom.
(f) Entire Agreement. This Agreement (including all Exhibits
----------------
attached hereto) is the final expression of, and contains the entire agreement
between, the parties with respect to the subject matter hereof and supersedes
all prior understandings with respect thereto. This Agreement may not be
modified, changed, supplemented or terminated, nor may any obligations
hereunder be waived, except by written instrument signed by the party to be
charged or by its agent duly authorized in writing or as otherwise expressly
permitted herein. The parties do not intend to confer any benefit hereunder
on any person, firm or corporation other than the parties hereto.
(g) Time of Essence. Seller and Buyer acknowledge and agree that
---------------
time is strictly of the essence with respect to each and every term, condition,
obligation and provision hereof and that failure to timely perform any of the
terms, conditions, obligations or provisions hereof by either party shall
constitute a material breach of and a non-curable (but waivable) default under
this Agreement by the party so failing to perform.
(h) Construction. Headings at the beginning of each paragraph and
------------
subparagraph are solely for the convenience of the parties and are not a part
of the Agreement. Whenever required by the context of this Agreement, the
singular shall include the plural and the masculine shall include the feminine
and vice versa. This Agreement shall not be construed as if it had been
prepared by one of the parties, but rather as if both parties had prepared
the same. Unless otherwise indicated, all references to paragraphs and
subparagraphs are to this Agreement. In the event the date on which Buyer or
Seller is required to take any action under the terms of this Agreement is not
a business day, the action shall be taken on the next succeeding business day.
(i) Survival. Unless otherwise expressly provided herein, all
--------
representations, warranties and covenants (to the extent such covenants are
not fully performed or rendered moot by the Closing) shall survive the
Closing.
(j) Exhibits. The Exhibits to this Agreement are an integral part
--------
of this Agreement and are incorporated herein by reference. If any of the
Exhibits hereto are not attached at the time of execution hereof, the
preparation and attachment of such Exhibits in form mutually satisfactory to
the parties shall be an additional condition to the Closing. The parties
agree to negotiate the terms and definitive language of such Exhibits in
15
<PAGE> 17
good faith, and to use their respective best efforts in connection therewith.
(l) Counterparts. This Agreement may be executed in an original and
------------
any number of counterparts, each of which shall be deemed to be an original
of one and the same instrument.
(m) Governing Law. This Agreement shall be construed according to
-------------
and governed by the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year hereinbefore written.
DECOR CONCEPTS, INC.
By: /s/ Bruce DeBever
------------------------------------
Bruce DeBever, President
FALCON PRODUCTS, INC.
By: /s/ Stephen L. Clanton
------------------------------------
Stephen L. Clanton,
Executive Vice President
and Chief Financial Officer
16
<PAGE> 1
<TABLE>
EXHIBIT 11
Falcon Products, Inc. and Subsidiaries
COMPUTATION OF NET EARNINGS PER SHARE
-------------------------------------
For the years ended October 28, 1995, October 29, 1994, and October 30, 1993
<CAPTION>
Primary Earnings per Share:
- - ---------------------------
1995 <F1> 1994 <F1> 1993 <F1>
------------- ------------- -------------
<S> <C> <C> <C>
Net earnings $7,456,679 $6,176,158 $4,447,412
========== ========== ==========
Average number of common
shares outstanding 9,497,104 9,368,212 8,504,958
Assumed exercise of options
(treasury stock method) 247,408 220,926 308,783
---------- ---------- ----------
Shares for primary
computation 9,744,512 9,589,138 8,813,741
========== ========== ==========
Net earnings per share $.77 $.64 $.50
==== ==== ====
<CAPTION>
Fully Diluted Earnings per Share:
- - --------------------------------
<S> <C> <C> <C>
Net earnings $7,456,679 $6,176,158 $4,447,412
========== ========== ==========
Average number of common
shares outstanding 9,497,104 9,368,212 8,504,958
Assumed exercise of options
(treasury stock method) 301,615 233,025 308,783
---------- ---------- ----------
Shares for fully diluted
computation 9,798,719 9,601,237 8,813,741
========== ========== ==========
Net earnings per share $.76 $.64 $.50
==== ==== ====
<FN>
<F1> Per share data reflects adjustments related to December 1995, 10% stock
dividend.
</TABLE>
<PAGE> 1
EXHIBIT 21
-----------
Falcon Products, Inc. and Subsidiaries
SUBSIDIARIES OF THE COMPANY
------------------------------
The following are wholly-owned subsidiaries of the Company: Kaydee Metal
Products Corporation; Falcon International, E.U.R.L. (a French corporation);
Falcon De Juarez, S.A. de C.V.(a Mexican corporation); and Fundiciones,
Tecnicas, S.A. (a Mexican corporation). Falcon Mimon, a.s. (a Czech Republic
corporation) is a 75%-owned subsidiary of the Company.
<PAGE> 1
EXHIBIT 23
-----------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
TO FALCON PRODUCTS, INC.:
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statements File Nos. 2-98469, 33-15698, 33-46997 and 33-46998.
/S/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
January 23, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-K FOR THE YEAR ENDED OCTOBER 28, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-28-1995
<PERIOD-END> OCT-28-1995
<CASH> 6,969,786
<SECURITIES> 0
<RECEIVABLES> 17,438,415
<ALLOWANCES> 369,000
<INVENTORY> 16,705,744
<CURRENT-ASSETS> 43,080,933
<PP&E> 35,989,299
<DEPRECIATION> 13,802,033
<TOTAL-ASSETS> 74,884,214
<CURRENT-LIABILITIES> 13,153,524
<BONDS> 0
<COMMON> 190,795
0
0
<OTHER-SE> 58,115,851
<TOTAL-LIABILITY-AND-EQUITY> 74,884,214
<SALES> 90,036,369
<TOTAL-REVENUES> 90,036,369
<CGS> 59,159,360
<TOTAL-COSTS> 59,159,360
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (141,523)
<INCOME-PRETAX> 11,914,639
<INCOME-TAX> 4,457,960
<INCOME-CONTINUING> 7,456,679
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,456,679
<EPS-PRIMARY> .77
<EPS-DILUTED> .76
</TABLE>
