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Previous: THREE D DEPARTMENTS INC, 10-Q, 1998-03-17 |
Next: FARAH INC, 10-Q, 1998-03-17 |
<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 31, 1998
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 10, 1998, the registrant had 9,263,180 shares of common stock,
$.02 par value, outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
--------------------
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Earnings
-----------------------------------
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
-----------------------------
January 31, February 1,
(In thousands, except per share data) 1998 1997
----------- -----------
<S> <C> <C>
Net sales $28,060 $26,733
Cost of sales 19,926 19,075
------- -------
Gross margin 8,134 7,658
Selling, general and administrative expenses 5,348 5,004
------- -------
Operating profit 2,786 2,654
Interest income, net 97 32
Minority interest in consolidated subsidiary 15 36
------- -------
Earnings from continuing operations before
income taxes 2,898 2,722
Income tax expense 1,116 1,034
------- -------
Net earnings from continuing operations 1,782 1,688
Earnings from discontinued operations, net of tax -- 179
------- -------
Net earnings $ 1,782 $ 1,867
======= =======
Basic and diluted earnings per share:
Continuing operations $ .19 $ .17
Discontinued operations -- .02
------- -------
Net earnings per share $ .19 $ .19
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE> 3
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Balance Sheets
---------------------------
(Unaudited)
<CAPTION>
Jan. 31, Nov. 1,
Assets 1998 1997
- ------ -------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,837 $16,294
Accounts receivable, less allowances
of $374 and $337, respectively 15,444 18,625
Inventories 23,001 22,687
Prepayments and other current assets 4,047 3,732
------- -------
Total current assets 50,329 61,338
------- -------
Property, plant and equipment:
Land 2,707 2,731
Buildings and improvements 12,720 12,347
Machinery and equipment 27,185 26,360
------- -------
42,612 41,438
Less accumulated depreciation 16,843 16,227
------- -------
Total property, plant and equipment 25,769 25,211
------- -------
Other assets, net of accumulated amortization:
Goodwill 9,512 9,454
Other 3,253 3,354
------- -------
Total other assets 12,765 12,808
------- -------
Total Assets $88,863 $99,357
======= =======
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 7,073 $10,458
Accrued liabilities 5,422 10,716
Current maturities of long-term debt 1,329 1,473
------- -------
Total current liabilities 13,824 22,647
Long-term obligations:
Long-term debt 275 321
Pension liability 96 96
Deferred income taxes 2,155 2,155
Minority interest in consolidated subsidiary 859 874
------- -------
Total liabilities 17,209 26,093
------- -------
Stockholders' equity:
Common stock, $.02 par value: authorized 20,000,000 shares;
9,915,117 shares issued 198 198
Additional paid-in capital 47,376 47,376
Treasury stock, at cost (651,937 and 477,512 shares, respectively) (9,518) (6,855)
Cumulative translation adjustments (980) (727)
Retained earnings 34,578 33,272
------- -------
Total stockholders' equity 71,654 73,264
------- -------
Total Liabilities and Stockholders' Equity $88,863 $99,357
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE> 4
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Stockholders' Equity
-----------------------------------------------
Thirteen Weeks Ended January 31, 1998 and February 2, 1997
----------------------------------------------------------
(Unaudited)
<CAPTION>
(In thousands) Additional Cumulative Total
Common Paid-in Treasury Translation Retained Stockholders'
Stock Capital Stock Adjustments Earnings Equity
------ ---------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, November 2, 1996 $198 $47,260 $(1,529) $ 274 $22,273 $68,476
Net earnings -- -- -- -- 1,867 1,867
Exercise of stock options -- -- 113 -- (42) 71
Issuance of stock to Employee
Stock Purchase Plan -- -- 227 -- -- 227
Compensation expense under
stock and option plans -- 2 -- -- 8 10
Translation adjustments -- -- -- 8 -- 8
Cash dividends -- -- -- -- (339) (339)
Treasury stock purchases -- -- (1,981) -- -- (1,981)
---- ------- ------- ----- ------- -------
Balance, February 1, 1997 $198 $47,262 $(3,170) $ 282 $23,767 $68,339
==== ======= ======= ===== ======= =======
Balance, November 1, 1997 $198 $47,376 $(6,855) $(727) $33,272 $73,264
Net earnings -- -- -- -- 1,782 1,782
Exercise of stock options -- -- 132 -- (106) 26
Issuance of stock to Employee
Stock Purchase Plan -- -- 31 -- -- 31
Translation adjustments -- -- -- (253) -- (253)
Cash dividends -- -- -- -- (370) (370)
Treasury stock purchases -- -- (2,975) -- -- (2,975)
Issuance of stock for business acquisition -- -- 149 -- -- 149
---- ------- ------- ----- ------- -------
Balance, January 31, 1998 $198 $47,376 $(9,518) $(980) $34,578 $71,654
==== ======= ======= ===== ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE> 5
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Cash Flows
-------------------------------------
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
-----------------------------
(In thousands) January 31, February 1,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,782 $ 1,867
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Earnings from discontinued operations -- (179)
Depreciation and amortization 920 1,006
Translation adjustments (253) 8
Compensation expense under stock and option plans -- 10
Minority interest in consolidated subsidiary (15) (36)
Change in assets and liabilities:
Accounts receivable, net 3,181 198
Inventories (314) (1,367)
Prepayments and other current assets (315) (144)
Other assets, net (259) (107)
Accounts payable (3,385) (707)
Accrued liabilities (5,294) 103
------- -------
Net cash provided by (used in) continuing operations (3,952) 652
Net cash provided by discontinued operations -- 531
------- -------
Net cash provided by (used in) operating activities (3,952) 1,183
------- -------
Cash flows from investing activities:
Additions to property, plant and equipment, net (1,176) (1,009)
------- -------
Net cash used in investing activities (1,176) (1,009)
------- -------
Cash flows from financing activities:
Repayment of long-term debt, net (190) (62)
Common stock issuances 206 298
Cash dividends (370) (339)
Treasury stock purchases (2,975) (1,981)
------- -------
Net cash used in financing activities (3,329) (2,084)
------- -------
Net decrease in cash and cash equivalents (8,457) (1,910)
Cash and cash equivalents-beginning of period 16,294 5,714
------- -------
Cash and cash equivalents-end of period $ 7,837 $ 3,804
======= =======
Supplemental Cash Flow Information:
Cash paid for interest $ 42 $ 28
======= =======
Cash paid for income taxes $ 3,116 $ 179
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE> 6
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Notes to Consolidated Financial Statements
------------------------------------------
Thirteen Weeks Ended January 31, 1998
-------------------------------------
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 November 1, 1997,
filed with the Securities and Exchange Commission.
Note 2. - Discontinued Operations
On September 8, 1997, the Company completed the sale of its William
Hodges division (the "Hodges Division") to Leggett & Platt, Incorporated for
approximately $17.5 million. The Hodges Division manufactured wire shelving
and kitchen equipment. Earnings from the discontinued Hodges Division
operations were $179,000 for the thirteen weeks ended February 1, 1997, net
of applicable income taxes of $109,000.
Note 3. - Subsequent Event
On March 10, 1998, the Company purchased all of the stock of Howe
Furniture Corporation and its subsidiaries ("Howe") for approximately $18.0
million, including assumed debt. Howe is a privately owned designer and
marketer of tables for the contract office and hospitality markets located in
Trumbull, Connecticut. The Company intends to finance the acquisition with a
combination of borrowings under a revolving credit facility with a bank and
available cash reserves. The acquisition is not expected to have a significant
impact on the Company's results for fiscal year 1998.
Item 2. - Management's Discussion and Analysis of Results of Operations and
-----------------------------------------------------------------
Financial Condition
-------------------
The information contained in this Item 2 includes statements regarding
matters which are not historical facts (including statements as to the
Company's plans, beliefs or expectations) that are forward-looking statements
within the meaning of the federal securities laws. Because such
forward-looking statements involve certain risks and uncertainties, the
Company's actual results and the timing of certain events could differ
materially from those discussed herein.
6
<PAGE> 7
RESULTS OF OPERATIONS
General
The following table sets forth, for the periods presented, certain
information relating to the continuing operations of the Company, expressed
as a percentage of net sales:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
------------------------------
January 31, February 1,
1998 1997
---------- -----------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 71.0 71.4
Gross margin 29.0 28.6
Selling, general and administrative expenses 19.1 18.7
Operating profit 9.9 9.9
Interest income, net .3 .1
Minority interest in consolidated subsidiary .1 .2
Earnings from continuing operations before income taxes 10.3 10.2
Income tax expense 3.9 3.9
Net earnings from continuing operations 6.4 6.3
</TABLE>
Thirteen weeks ended January 31, 1998, compared to the thirteen weeks ended
February 1, 1997.
Net earnings from continuing operations were $1.8 million in the first
quarter of fiscal 1998, and $1.7 million in 1997. Earnings per share from
continuing operations were $.19 in 1998, and $.17 in 1997, an increase of
11.8%. Earnings from discontinued operations were $.2 million, or $.02 per
share, in the first quarter of 1997. Total earnings per share were $.19 in
both the first quarter of 1998 and 1997.
Net sales from continuing operations for the first quarter of 1998 were
$28.1 million, an increase of $5.0% over the 1997 first quarter net sales of
$26.7 million. This increase resulted primarily from increased sales of the
Company's lodging products and its contract/office furniture products.
Cost of sales was $19.9 million for the 1998 first quarter, an increase
of 4.5% from $19.1 million in the first quarter of 1997. The overall
increase is a result of the increased sales volume. Gross margin increased
to $8.1 million for the first quarter of 1998, a 6.2% increase from $7.7
million in the same quarter of 1997. Gross margin as a percentage of net
sales increased to 29.0% in 1998 from 28.6% in 1997. The higher gross margin
percentage during the first quarter of 1998 was due primarily to improved
performance at the Company's Tijuana, Mexico and City of Industry, California
manufacturing plants.
Selling, general and administrative expenses were $5.3 million in the
first quarter of 1998, compared to $5.0 million in the first quarter of 1997,
a 6.9% increase. The increase is primarily related to increased sales and
marketing programs, including salaries, commissions and travel expenses
associated with the increased sales volume. Selling, general and
administrative expenses as a percentage of net sales, increased to 19.1% for
the first quarter of 1998 as compared to 18.7% for the same period of 1997.
7
<PAGE> 8
The increase in the expense rate in 1998 is primarily the result of increased
sales and marketing programs during the quarter and higher data processing
costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at January 31, 1998, was $36.5 million
and its ratio of current assets to current liabilities was 3.6 to 1.0,
compared with $38.7 million and 2.7 to 1.0 at November 1, 1997.
During the first quarter of 1998, the Company repurchased approximately
195,000 shares of its common stock for a total cost of approximately $3.0
million. The Company is authorized to purchase up to an additional 662,000
shares of its common stock under stock repurchase programs authorized by the
Board of Directors.
The Company has a $20.0 million unsecured revolving line of credit
agreement with a commercial bank. The revolving line of credit bears at a
floating rate based on LIBOR or the Federal Funds Rate, at the Company's
election, plus a spread. The spread is determined by a leverage ratio, as
defined in the agreement, for the twelve month period ending the previous
fiscal quarter. The interest rate on the revolving credit facility is currently
LIBOR plus .75%. As of January 31, 1998, 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 available cash reserves and available borrowings
under its revolving credit facility. The Company's operating cash flows
constitute its primary source of liquidity.
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings
-----------------
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 it
believes to be adequate. There are no material pending legal proceedings,
other than routine litigation incidental to the business, to which the
Company is a party or of which any of the Company's property is the subject.
Item 2. - Changes in Securities
---------------------
None.
Item 3. - Defaults Upon Senior Securities
-------------------------------
None.
8
<PAGE> 9
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) Exhibits
Exhibit 11 - Computation of Earnings Per Share
(b) Reports on Form 8-K
None.
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.
Date: March 16, 1998 /s/ Franklin A. Jacobs
----------------------
Franklin A. Jacobs
Chief Executive Officer
and Chairman of the Board
Date: March 16, 1998 /s/ Michael J. Dreller
----------------------
Michael J. Dreller
Vice President and
Chief Financial Officer
9
<PAGE> 1
EXHIBIT NO. 11
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<CAPTION>
(in thousands, except per share amounts) Thirteen Weeks Ended
-----------------------------
January 31, February 1,
1998 1997
----------- -----------
<S> <C> <C>
Basic Earnings Per Share:
- ------------------------
Average number of common shares outstanding 9,348 9,746
====== ======
Net earnings $1,782 $1,867
====== ======
Earnings per share $ .19 $ .19
====== ======
Diluted Earnings Per Share:
- ---------------------------
Average number of common shares outstanding 9,348 9,746
Assumed exercise of options
(treasury stock method) 186 197
------ ------
Shares for diluted computation 9,534 9,943
====== ======
Net earnings $1,782 $1,867
====== ======
Earnings per share $ .19 $ .19
====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10-Q for the quarterly period ended January 31, 1998 and is qualified
in its entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 7,837
<SECURITIES> 0
<RECEIVABLES> 15,444
<ALLOWANCES> 374
<INVENTORY> 23,001
<CURRENT-ASSETS> 50,329
<PP&E> 42,612
<DEPRECIATION> 16,843
<TOTAL-ASSETS> 88,863
<CURRENT-LIABILITIES> 13,824
<BONDS> 0
<COMMON> 198
0
0
<OTHER-SE> 71,456
<TOTAL-LIABILITY-AND-EQUITY> 88,863
<SALES> 28,060
<TOTAL-REVENUES> 28,060
<CGS> 19,926
<TOTAL-COSTS> 19,926
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (97)
<INCOME-PRETAX> 2,898
<INCOME-TAX> 1,116
<INCOME-CONTINUING> 1,782
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,782
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
|
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