<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 27, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ------------ to -------------
Commission File Number 1-11577
FALCON PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 43-0730877
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9387 Dielman Industrial Drive 63132
St. Louis, Missouri (Zip Code)
(Address of principal executive offices)
(314) 991-9200
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months, and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
------ -----
As of March 4, 1996, the registrant had 9,577,069 shares of common stock,
$.02 par value, outstanding.
Page 1 of 11 pages
Exhibit Index is on page 10 of this report.
<PAGE> 2
PART I - FINANCIAL INFORMATION
-----------------------
Item 1. - Financial Statements
---------------------
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Balance Sheets
---------------------------
(Unaudited)
<CAPTION>
January 27, October 28,
1996 1995
----------- -----------
Assets
- ------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,511,684 $ 6,969,786
Accounts receivable, less allowances
of $414,000 and $369,000, respectively 15,560,080 17,438,415
Inventories 16,884,478 16,705,744
Prepaid expenses and other current assets 2,138,811 1,966,988
----------- -----------
Total current assets 41,095,053 43,080,933
----------- -----------
Property, plant and equipment:
Land 2,841,625 2,841,625
Buildings and improvements 12,184,135 11,871,150
Machinery and equipment 22,878,045 21,276,524
----------- -----------
37,903,805 35,989,299
Less accumulated depreciation 14,411,378 13,802,033
----------- -----------
Total property, plant and equipment 23,492,427 22,187,266
----------- -----------
Other assets, net of accumulated amortization:
Excess of cost over fair value of net assets acquired 6,942,811 6,858,152
Other 2,837,998 2,757,863
----------- -----------
Total other assets 9,780,809 9,616,015
----------- -----------
$74,368,289 $74,884,214
=========== ===========
<CAPTION>
Liabilities and Stockholders' Equity
- ------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 6,423,799 $ 7,158,284
Accrued liabilities 4,408,398 5,031,264
Current maturities of long-term debt 966,685 963,976
----------- -----------
Total current liabilities 11,798,882 13,153,524
Long-term obligations:
Long-term debt 843,826 925,375
Pension liability 303,445 303,445
Deferred income taxes 1,185,722 1,185,722
Minority interest in consolidated subsidiary 992,995 1,009,502
----------- -----------
Total liabilities 15,124,870 16,577,568
----------- -----------
Stockholders' equity:
Common stock, $.02 par value: authorized 20,000,000 shares;
9,591,310 and 9,539,737 shares issued, respectively 191,827 190,795
Additional paid-in capital 42,976,175 42,760,776
Deferred compensation plan (62,906) (70,769)
Treasury stock, at cost (64,807 and 11,000 shares, respectively) (811,775) (135,000)
Cumulative translation adjustments 187,413 182,119
Retained earnings 16,762,685 15,378,725
----------- -----------
Total stockholders' equity 59,243,419 58,306,646
----------- -----------
$74,368,289 $74,884,214
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE> 3
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Earnings
-----------------------------------
(Unaudited)
<CAPTION>
Thirteen Thirteen
Weeks Ended Weeks Ended
January 27, 1996 January 28,1995
---------------- ---------------
<S> <C> <C>
Net sales $25,433,356 $18,820,031
Cost of sales 17,826,834 12,994,894
----------- -----------
Gross margin 7,606,522 5,825,137
Selling, general and administrative expenses 5,032,348 3,820,881
----------- -----------
Operating profit 2,574,174 2,004,256
Interest income, net 27,013 36,523
Minority interest in consolidated subsidiary 16,507 (10,752)
----------- -----------
Earnings before income taxes 2,617,694 2,030,027
Income tax expense 994,700 751,290
----------- -----------
Net earnings $ 1,622,994 $ 1,278,737
=========== ===========
Primary earnings per share<F*> $.17 $.13
==== ====
<FN>
<F*> Per share data has been adjusted to reflect the effects of the December
13, 1995, 10% stock dividend.
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE> 4
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Stockholders' Equity
-----------------------------------------------
Thirteen Weeks Ended January 27, 1996, and January 28, 1995
-----------------------------------------------------------
(Unaudited)
<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 29, 1994 $171,455 $30,510,061 $ -- $ -- $(38,621) $19,912,649 $50,555,544
Net earnings -- -- -- -- -- 1,278,737 1,278,737
Exercise of stock options 420 26,415 -- -- -- -- 26,835
Issuance of stock to Employee
Stock Purchase Plan 209 120,531 -- -- -- -- 120,740
Compensation expense under
non-qualified stock options -- 5,193 -- -- -- -- 5,193
Translation adjustments -- -- -- -- (18,680) -- (18,680)
Cash dividends -- -- -- -- -- (171,597) (171,597)
-------- ----------- -------- --------- -------- ----------- -----------
Balance, January 28, 1995 $172,084 $30,662,200 -- -- $(57,301) $21,019,789 $51,796,772
======== =========== ======== ========= ======== =========== ===========
Balance, October 28, 1995 $190,795 $42,760,776 $(70,769) $(135,000) $182,119 $15,378,725 $58,306,646
Net earnings -- -- -- -- -- 1,622,994 1,622,994
Exercise of stock options 965 158,738 -- -- -- -- 159,703
Issuance of stock to Employee
Stock Purchase Plan 67 54,825 -- 100,551 -- -- 155,443
Compensation expense under
stock and option plans -- 1,836 7,863 -- -- -- 9,699
Translation adjustments -- -- -- -- 5,294 -- 5,294
Cash dividends -- -- -- -- -- (239,034) (239,034)
Treasury stock purchases -- -- -- (777,326) -- -- (777,326)
-------- ----------- -------- --------- -------- ----------- -----------
Balance, January 27, 1996 $191,827 $42,976,175 $(62,906) $(811,775) $187,413 $16,762,685 $59,243,419
======== =========== ======== ========= ======== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE> 5
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Cash Flows
-------------------------------------
(Unaudited)
<CAPTION>
Thirteen Thirteen
Weeks Ended Weeks Ended
January 27, 1996 January 28, 1995
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $1,622,994 $1,278,737
---------- ----------
Adjustments to reconcile net earnings
to net cash provided by operating activities
Depreciation 638,421 471,300
Amortization of other assets 273,720 230,825
Translation adjustments during year 5,294 (18,680)
Compensation expense under stock and option plans 9,699 5,193
Minority interest in consolidated subsidiary (16,507) 10,752
Change in assets and liabilities:
Decrease (increase) in:
Accounts receivable, net 1,878,335 3,699,032
Inventories (178,734) (495,203)
Prepaid expenses and other current assets (171,823) (34,900)
Other assets, net (288,514) (494,792)
Increase (decrease) in:
Accounts payable (357,756) (478,249)
Accrued liabilities (772,866) (1,329,646)
---------- ----------
Total adjustments 1,019,269 1,565,632
---------- ----------
Net cash provided by operating activities 2,642,263 2,844,369
---------- ----------
Cash flows from investing activities:
Cost of business acquired (376,729) --
Additions to property, plant and equipment, net (1,943,582) (1,867,121)
---------- ----------
Net cash used in investing activities (2,320,311) (1,867,121)
---------- ----------
Cash flows from financing activities:
Additions to long-term debt -- 220,400
Repayment of long-term debt (78,840) (217,846)
Common stock issuances 315,146 147,575
Treasury stock purchases (777,326) --
Cash dividends (239,034) (171,597)
---------- ----------
Net cash used in financing activities (780,054) (21,468)
---------- ----------
Net increase (decrease) in cash and cash equivalents (458,102) 955,780
Cash and cash equivalents-beginning of period 6,969,786 7,312,189
---------- ----------
Cash and cash equivalents-end of period $6,511,684 $8,267,969
========== ==========
Supplemental Cash Flow Information:
Cash paid for interest $ 56,454 $ 59,226
========== ==========
Cash paid for income taxes $ 31,000 $ 959,700
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE> 6
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Notes to Consolidated Financial Statements
------------------------------------------
Thirteen Weeks Ended January 27, 1996
-------------------------------------
Note 1. - Interim Results
The financial statements contained herein are unaudited. In the opinion
of management, these financial statements reflect all adjustments, consisting
only of normal recurring adjustments, which are necessary for fair
presentation of the results of the interim periods presented. Reference is
made to the footnotes to the consolidated financial statements contained in
the Company's Annual Report on Form 10-K for the year ended October 28,
1995, filed with the Securities and Exchange Commission.
Note 2. - 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
furniture products such as seating, tables, and casegoods for restaurant
chains. The total purchase price for the transaction was approximately
$1,472,000. This purchase was funded by the Company with its available cash
reserves.
Item 2. - Management's Discussion and Analysis of Results of Operations and
-----------------------------------------------------------------
Financial Condition
-------------------
Results of Operations
General
<TABLE>
The following table sets forth, for the periods presented, certain
information relating to the operations of the Company, expressed as a
percentage of net sales:
<CAPTION>
Thirteen Weeks Ended
----------------------
January 27, 1996 January 28, 1995
---------------- ----------------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 70.1 69.0
Gross margin 29.9 31.0
Selling, general and administrative expenses 19.8 20.3
Operating profit 10.1 10.7
Interest income, net .1 .2
Minority interest in consolidated subsidiary .1 (.1)
Earnings before income taxes 10.3 10.8
Income tax expense 3.9 4.0
Net earnings 6.4 6.8
</TABLE>
-6-
<PAGE> 7
Thirteen weeks ended January 27, 1996, compared to the thirteen weeks ended
January 28, 1995
Net earnings totaled $1,623,000 in the first quarter of 1996, compared to
$1,279,000 in 1995, an increase of 26.9%. Earnings per share reached $.17 in
1996, compared to $.13 in 1995, a 30.8% increase.
Net sales for the first quarter of 1996 were $25.4 million, an increase of
35.1% over 1995 first quarter net sales of $18.8 million. The sales increase
over the prior year primarily resulted from strong sales performance from the
Company's National Accounts program, which focuses on large national
restaurant chains, and incremental sales from the acquisition of Decor
Concepts during 1995. Net sales for the quarter excluding sales resulting
from this acquisition were approximately $22.9 million.
Cost of sales was $17.8 million for the 1996 first quarter, an increase
of 37.2% from $13.0 million in the 1995 first quarter. The overall increase
is primarily related to increased sales volume. Gross margin increased to
$7.6 million for the first quarter of 1996, a 30.6% increase from $5.8
million in the same quarter of 1995. Gross margin as a percentage of net
sales decreased to 29.9% in 1996 from 31.0% in 1995 primarily due to higher
production costs of the new facility acquired from Decor Concepts.
Selling, general and administrative expenses were $5.0 million in the 1996
first quarter, compared to $3.8 million in the 1995 first quarter, a 31.7%
increase. The overall increase is primarily related to higher sales volume.
Selling, general and administrative expenses as a percentage of net sales
decreased to 19.8% for the first quarter of 1996 compared to 20.3% for the
same period of 1995, primarily due to certain economies of scale associated
with the sales volume increases and operating expense control measures.
The Company reported net interest income of $27,000 for the first quarter
of 1996, versus net interest income of $37,000 for the comparable period in
1995. The decrease in net interest income is primarily due to the reduction
of available funds invested in interest-bearing securities due to the
acquisition of Decor Concepts in 1995.
Income tax expense increased by $243,000, or 32.4%, in the first quarter
of 1996 compared to the same period in 1995 due to higher earnings and an
increase in the effective tax rate during 1996.
Liquidity and Capital Resources
The Company's working capital at January 27, 1996, was $29.3 million and
its ratio of current assets to current liabilities was 3.5 to 1.0, compared
to $29.9 million and 3.3 to 1.0 at October 28, 1995.
During the first quarter of 1996, the Company acquired 62,000 shares of its
common stock for a total cost of approximately $800,000. The Company is
authorized to purchase up to 250,000 shares of its common stock under a stock
repurchase plan previously approved by the Board of Directors.
The Company has a $2 million unsecured revolving line of credit agreement
with a commercial bank. The revolving line of credit bears interest at the
London Interbank Offered Rate plus 1.25% and expires on July 1, 1997. As of
January 27, 1996, there were no amounts outstanding under the revolving line
of credit.
The Company expects that it will meet its ongoing working capital and
capital requirements, from a combination of internally generated funds,
available cash reserves, and available borrowings under its revolving credit
facility. The Company's operating cash flows constitute its primary internal
source of liquidity.
-7-
<PAGE> 8
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.
PART II - OTHER INFORMATION
-----------------
Item 1. - Legal Proceedings
-----------------
There are no material pending legal proceedings, other
than routine litigation incidental to the business, to
which the registrant is a party or of which any of the
registrant's property is the subject.
Item 2. - Changes in Securities
---------------------
None.
Item 3. - Defaults Upon Senior Securities
-------------------------------
None.
Item 4. - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5. - Other Information
-----------------
None.
Item 6. - Exhibits and Reports on Form 8-K
--------------------------------
(a) For exhibits, see exhibit index on page 10.
(b) No Current Reports on Form 8-K have been filed
during the thirteen weeks ended January 27, 1996.
-8-
<PAGE> 9
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FALCON PRODUCTS, INC.
---------------------
(Registrant)
Date: March 11, 1996 /s/ Franklin A. Jacobs
---------------------------------
Franklin A. Jacobs
Chief Executive Officer and
Chairman of the Board
Date: March 11, 1996 /s/ Michael J. Dreller
---------------------------------
Michael J. Dreller
Vice President and
Chief Financial Officer
-9-
<PAGE> 10
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit
Number Description Page
- ------- ----------- ----
<C> <S> <C>
11 Computation of net earnings 11
per share, filed herewith.
</TABLE>
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<PAGE> 1
<TABLE>
EXHIBIT NO. 11
Falcon Products, Inc. and Subsidiaries
--------------------------------------
COMPUTATION OF NET EARNINGS PER SHARE
(Unaudited)
Thirteen Weeks Ended
-----------------------------
January 27, January 28,
Primary Earnings Per Share: 1996 1995
- --------------------------- ------------- -------------
<S> <C> <C>
Net earnings $1,622,994 $1,278,737
========== ==========
Average number of common shares
outstanding 9,522,661 9,439,485
Assumed exercise of options
(treasury stock method) 277,375 232,957
---------- ----------
Shares for primary computation 9,800,036 9,672,442
========== ==========
Net earnings per share $.17 $.13
==== ====
<CAPTION>
Fully Diluted Earnings Per Share:
- ---------------------------------
<S> <C> <C>
Net earnings $1,622,994 $1,278,737
========== ==========
Average number of common shares
outstanding 9,522,661 9,439,485
Assumed exercise of options
(treasury stock method) 281,323 260,244
---------- ----------
Shares for fully diluted computation 9,803,984 9,699,729
========== ==========
Net earnings per share $.17 $.13
==== ====
Note: Share data has been adjusted to reflect the effects of the December 13,
1995, 10% stock dividend.
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
SEC Form 10Q for the quarterly period ended January 27, 1996, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-02-1996
<PERIOD-START> OCT-29-1995
<PERIOD-END> JAN-27-1996
<CASH> 6,511,684
<SECURITIES> 0
<RECEIVABLES> 15,560,080
<ALLOWANCES> 414,000
<INVENTORY> 16,884,478
<CURRENT-ASSETS> 41,095,053
<PP&E> 37,903,805
<DEPRECIATION> 14,411,378
<TOTAL-ASSETS> 74,368,289
<CURRENT-LIABILITIES> 11,798,882
<BONDS> 0
<COMMON> 191,827
0
0
<OTHER-SE> 59,051,592
<TOTAL-LIABILITY-AND-EQUITY> 74,368,289
<SALES> 25,433,356
<TOTAL-REVENUES> 25,433,356
<CGS> 17,826,834
<TOTAL-COSTS> 17,826,834
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (27,013)
<INCOME-PRETAX> 2,617,694
<INCOME-TAX> 994,700
<INCOME-CONTINUING> 1,622,994
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,622,994
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
