<PAGE>
<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 29, 2000
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 June 9, 2000, the registrant had 8,714,274 shares of common stock,
$.02 par value, outstanding.
1
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
--------------------
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Earnings
-----------------------------------
(Unaudited)
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
----------------------- ------------------------
April 29, May 1, April 29, May 1,
(In thousands, except per share data) 2000 1999 2000 1999
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Net sales $ 79,548 $36,469 $ 154,621 $71,064
Cost of sales 58,248 25,797 112,010 50,490
--------- ------- --------- -------
Gross margin 21,300 10,672 42,611 20,574
Selling, general and administrative expenses 12,974 7,220 26,267 13,833
--------- ------- --------- -------
Operating profit 8,326 3,452 16,344 6,741
Interest expense and other 4,234 299 8,550 582
--------- ------- --------- -------
Earnings before income taxes 4,092 3,153 7,794 6,159
Income tax expense 1,745 1,183 3,382 2,325
--------- ------- --------- -------
Net earnings $ 2,347 $ 1,970 $ 4,412 $ 3,834
========= ======= ========= =======
Basic and diluted earnings per share: $ .27 $ .23 $ .50 $ .43
========= ======= ========= =======
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE>
<PAGE>
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Balance Sheets
---------------------------
(Unaudited)
<CAPTION>
(In thousands, except share data)
Apr. 29, Oct. 30,
Assets 2000 1999
------ -------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,149 $ 2,878
Accounts receivable, less allowances
of $1,193 and $1,352, respectively 41,887 47,733
Inventories 48,943 49,078
Prepayments and other current assets 5,552 5,080
-------- --------
Total current assets 99,531 104,769
-------- --------
Property, plant and equipment:
Land 3,545 3,368
Buildings and improvements 25,267 25,284
Machinery and equipment 39,990 42,034
-------- --------
68,802 70,686
Less accumulated depreciation 18,626 21,845
-------- --------
Net property, plant and equipment 50,176 48,841
-------- --------
Other assets, net of accumulated amortization:
Goodwill 122,710 124,381
Other 14,684 14,215
-------- --------
Total other assets 137,394 138,596
-------- --------
Total Assets $287,101 $292,206
======== ========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 15,783 $ 20,890
Customer deposits 10,660 11,765
Accrued liabilities 22,643 22,872
Current maturities of long-term debt 8,137 2,443
-------- --------
Total current liabilities 57,223 57,970
Long-term obligations:
Long-term debt 153,191 162,063
Other 3,136 2,872
-------- --------
Total liabilities 213,550 222,905
-------- --------
Stockholders' equity:
Common stock, $.02 par value: authorized 20,000,000 shares;
issued 9,915,117 shares 198 198
Additional paid-in capital 47,376 47,376
Treasury stock, at cost (1,200,843 and 1,265,151 shares, respectively) (14,581) (15,455)
Cumulative translation adjustments (151) (221)
Retained earnings 40,709 37,403
-------- --------
Total stockholders' equity 73,551 69,301
-------- --------
Total Liabilities and Stockholders' Equity $287,101 $292,206
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<PAGE>
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Stockholders' Equity
-----------------------------------------------
Twenty-Six Weeks Ended April 29, 2000, and May 1, 1999
------------------------------------------------------
(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, October 31, 1998 $198 $47,376 $(13,557) $ (19) $37,948 $71,946
Net earnings -- -- -- -- 3,834 3,834
Translation adjustments -- -- -- (177) -- (177)
---- ------- -------- ----- ------- -------
Comprehensive income 3,657
Cash dividends -- -- -- -- (710) (710)
Issuance of stock to Employee
Stock Purchase Plan -- -- 574 -- (226) 348
Exercise of employee incentive
stock options -- -- 139 -- (67) 72
Treasury stock purchases -- -- (3,025) -- -- (3,025)
Issuance of stock for acquisition -- -- 184 -- (46) 138
---- ------- -------- ----- ------- -------
Balance, May 1, 1999 $198 $47,376 $(15,685) $(196) $40,733 $72,426
==== ======= ======== ===== ======= =======
Balance, October 30, 1999 $198 $47,376 $(15,455) $(221) $37,403 $69,301
Net earnings -- -- -- -- 4,412 4,412
Translation adjustments -- -- -- 70 -- 70
---- ------- -------- ----- ------- -------
Comprehensive income 4,482
Cash dividends -- -- -- -- (697) (697)
Issuance of stock to Employee
Stock Purchase Plan -- -- 692 -- (314) 378
Exercise of employee incentive
stock options -- -- 92 -- (60) 32
Issuance of stock for acquisition -- -- 90 -- (35) 55
---- ------- -------- ----- ------- -------
Balance, April 29, 2000 $198 $47,376 $(14,581) $(151) $40,709 $73,551
==== ======= ======== ===== ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
4
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<PAGE>
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Cash Flows
-------------------------------------
(Unaudited)
<CAPTION>
Twenty-Six Weeks Ended
-----------------------
(In thousands) April 29, May 1,
2000 1999
--------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 4,412 $ 3,834
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,837 1,721
Translation adjustments during period 70 (177)
Change in assets and liabilities:
Accounts receivable, net 5,846 2,116
Inventories 135 (2,884)
Prepayments and other current assets (472) (340)
Other assets, net (1,501) (2,891)
Accounts payable and customer deposits (6,212) (1,167)
Accrued liabilities (229) (1,751)
Other liabilities 264 (318)
------- -------
Cash provided by (used in) operating activities 7,150 (1,857)
------- -------
Cash flows from investing activities:
Additions to property, plant and equipment, net (3,469) (1,503)
------- -------
Cash used in investing activities (3,469) (1,503)
------- -------
Cash flows from financing activities:
Common stock issuances 465 558
Treasury stock purchases -- (3,025)
Cash dividends (697) (710)
Additions to (repayment of) long-term debt, net (3,178) 2,513
------- -------
Cash used in financing activities (3,410) (664)
------- -------
Net increase (decrease) in cash and cash equivalents 271 (4,024)
Cash and cash equivalents-beginning of period 2,878 5,186
------- -------
Cash and cash equivalents-end of period $ 3,149 $ 1,162
======= =======
Supplemental cash flow information:
Cash paid for interest $ 8,407 $ 578
======= =======
Cash paid for taxes $ 1,949 $ 2,745
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
5
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<PAGE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Notes to Consolidated Financial Statements
------------------------------------------
For the Twenty-Six Weeks Ended April 29, 2000
---------------------------------------------
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 a 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 30, 1999, filed with the Securities and
Exchange Commission.
Note 2 - Business Acquisition
The Company's results for the second quarter and twenty-six weeks
ended April 29, 2000 include Shelby Williams Industries, Inc. and its
subsidiaries ("Shelby Williams"). Shelby Williams was acquired during
June 1999, and was accounted for under the purchase method.
Accordingly, the results of operations of Shelby Williams are not
included in the reported results for the second quarter or twenty-six
weeks ending May 1, 1999.
Note 3 - Comprehensive Income
In fiscal 1999, the Company adopted Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income", which
reports Comprehensive Income and its components within the Consolidated
Statements of Stockholders' Equity. Comprehensive Income represents the
change in stockholders' equity from transactions and other events and
circumstances from non-owner sources which occur during the period. It
included all changes in equity except those resulting from investments
by owners and distribution to owners.
Note 4 - Inventories
Inventories at April 29, 2000, and October 30, 1999, consisted of
the following:
April 29, October 30,
In thousands 2000 1999
--------- -----------
Raw materials $32,844 $28,840
Work in process 6,769 11,570
Finished goods 9,330 8,668
--------- -----------
$48,943 $49,078
========= ===========
Note 5 - Special and Nonrecurring Item
In connection with the acquisition of Shelby Williams, the Company
recorded a pre-tax integration charge of $14.0 million to cover the
anticipated costs of combining its existing business with the acquired
business. The charge related to the closing of certain duplicative
manufacturing facilities. During 1999, the Company utilized $12.4
million of this charge. In the second quarter and twenty-six weeks
ended April 29, 2000, the Company utilized $.1 million and $1.1 million,
respectively, of the
6
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<PAGE>
charge. At April 29, 2000, the remaining amount of $.5 million relates
to severance and real estate exit costs for which payment is anticipated
during the remainder of fiscal year 2000.
Note 6 - Earnings Per Share
The following table reconciles net earnings and weighted average
shares outstanding to the amounts used to calculate basic and diluted
earnings per share for the second quarter and twenty-six week periods
ended April 29, 2000, and May 1, 1999.
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ----------------------
In thousands April 29, May 1, April 29, May 1,
except per-share data 2000 1999 2000 1999
--------- ------ --------- ------
<S> <C> <C> <C> <C>
Net earnings $2,347 $1,970 $4,412 $3,834
====== ====== ====== ======
Average shares outstanding 8,713 8,684 8,708 8,951
Assumed exercise of
options (treasury method) 126 20 68 49
------ ------ ------ ------
Average shares outstanding
adjusted for dilutive effects 8,839 8,704 8,776 9,000
====== ====== ====== ======
Basic earnings per share $ .27 $ .23 $ .50 $ .43
====== ====== ====== ======
Diluted earnings per share $ .27 $ .23 $ .50 $ .43
====== ====== ====== ======
</TABLE>
Basic earnings per share was computed by dividing earnings
available to common stockholders by the weighted average shares of
common stock outstanding during the period. Diluted earnings available
to common stockholders was determined assuming the options issued and
outstanding were exercised as of the first day of the respective period.
Outstanding options to purchase shares were not included in the
computation of diluted earnings per share if the exercise price was
greater than the average market price of the common stock.
Note 7 - Guarantor Subsidiaries
In June 1999, the Company entered into a new $120.0 million senior
secured credit facility (the "Senior Secured Credit Facility") with a
group of financial institutions which provided for a six year term loan
of $70.0 million and a six year revolving credit facility of up to $50.0
million.
All of the Company's domestic subsidiaries have guaranteed the
Senior Secured Credit Facility. A first priority security interest in
substantially all of the Company's properties and assets of its domestic
subsidiaries, including a pledge of all of the stock of the Company's
domestic subsidiaries and 66% of the stock of its foreign subsidiaries,
secures the Senior Secured Credit Facility.
The Company's senior subordinated notes are fully and
unconditionally guaranteed on an unsecured, senior subordinated basis by
each subsidiary of the Company (the "Guarantor Subsidiaries") other than
Howe Europe a/s, Falcon Products (Shenzhen) Limited, Falcon Mimon, a.s.,
Falcon De Juarez, S.A. de C.V., Falcon De Baja California, S.A. de C.V.
and Industrial Mueblera Shelby Williams, S.A. de C.V. (the "Non-
Guarantor Subsidiaries"). Each of the Guarantor Subsidiaries and Non-
Guarantor
7
<PAGE>
<PAGE>
Subsidiaries is wholly-owned by the Company, except for Falcon Mimon,
a.s., which is 87.4% owned by the Company.
The following condensed consolidating financial statements of the
Company include the combined accounts of the Company and its Guarantor
Subsidiaries and the combined accounts of the Non-Guarantor
Subsidiaries. Given the size of the Non-Guarantor Subsidiaries relative
to the Company and its Guarantor Subsidiaries on a consolidated basis,
separate financial statements of the respective Company and its
Guarantor Subsidiaries are not presented because management has
determined that such information is not material is assessing the
Company and its Guarantor Subsidiaries.
8
<PAGE>
<PAGE>
<TABLE>
Falcon Products, Inc.
Consolidating Statement of Earnings
For the Thirteen Weeks Ended April 29, 2000
<CAPTION>
Total Total
Guarantor Non-Guarantor Eliminations Total
-----------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $76,840 $5,563 $(2,855) $79,548
Cost of sales 56,493 4,610 (2,855) 58,248
Selling, general and administrative expenses 12,438 536 - 12,974
-----------------------------------------------------
Operating profit 7,909 417 - 8,326
Interest expense and other 4,176 58 - 4,234
-----------------------------------------------------
Earnings before income taxes 3,733 359 - 4,092
Income tax expense 1,657 88 - 1,745
-----------------------------------------------------
Net earnings $ 2,076 $ 271 $ - $ 2,347
=====================================================
</TABLE>
<TABLE>
Falcon Products, Inc.
Consolidating Statement of Earnings
For the Thirteen Weeks Ended May 1, 1999
<CAPTION>
Total Total
Guarantor Non-Guarantor Eliminations Total
-----------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $35,161 $4,472 $(3,164) $36,469
Cost of sales 24,940 4,021 (3,164) 25,797
Selling, general and administrative expenses 7,179 41 - 7,220
-----------------------------------------------------
Operating profit 3,042 410 - 3,452
Interest expense and other 274 25 - 299
-----------------------------------------------------
Earnings before income taxes 2,768 385 - 3,153
Income tax expense 1,095 88 - 1,183
-----------------------------------------------------
Net earnings $ 1,673 $ 297 $ - $ 1,970
=====================================================
</TABLE>
9
<PAGE>
<PAGE>
<TABLE>
Falcon Products, Inc.
Consolidating Statement of Earnings
For the Twenty-Six Weeks Ended April 29, 2000
<CAPTION>
Total Total
Guarantor Non-Guarantor Eliminations Total
-----------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $149,449 $10,394 $(5,222) $154,621
Cost of sales 108,178 9,054 (5,222) 112,010
Selling, general and administrative expenses 25,071 1,196 - 26,267
-----------------------------------------------------
Operating profit 16,200 144 - 16,344
Interest expense and other 8,472 78 - 8,550
-----------------------------------------------------
Earnings before income taxes 7,728 66 - 7,794
Income tax expense 3,238 144 - 3,382
-----------------------------------------------------
Net earnings (loss) $ 4,490 $ (78) $ - $ 4,412
=====================================================
</TABLE>
<TABLE>
Falcon Products, Inc.
Consolidating Statement of Earnings
For the Twenty-Six Weeks Ended May 1, 1999
<CAPTION>
Total Total
Guarantor Non-Guarantor Eliminations Total
-----------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 67,786 $ 9,606 $(6,328) $ 71,064
Cost of sales 48,440 8,378 (6,328) 50,490
Selling, general and administrative expenses 13,306 527 - 13,833
-----------------------------------------------------
Operating profit 6,040 701 - 6,741
Interest expense and other 552 30 - 582
-----------------------------------------------------
Earnings before income taxes 5,488 671 - 6,159
Income tax expense 2,168 157 - 2,325
-----------------------------------------------------
Net earnings $ 3,320 $ 514 $ - $ 3,834
=====================================================
</TABLE>
10
<PAGE>
<PAGE>
<TABLE>
Falcon Products, Inc.
Consolidating Balance Sheet
As of April 29, 2000
<CAPTION>
Total Total
Guarantor Non-Guarantor Eliminations Total
-----------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 1,973 $ 1,176 $ - $ 3,149
Accounts receivable 39,522 2,365 - 41,887
Inventories 43,826 5,117 - 48,943
Other current assets 4,421 1,131 - 5,552
-----------------------------------------------------
Total current assets 89,742 9,789 - 99,531
Property, plant and equipment, net 36,128 14,048 - 50,176
Investment in subsidiaries 10,527 - (10,527) -
Intangibles and other assets 137,394 - - 137,394
-----------------------------------------------------
Total assets $273,791 $23,837 $(10,527) $287,101
=====================================================
Liabilities and Stockholders' Equity
Current liabilities $ 52,445 $ 4,778 $ - $ 57,223
Long-term debt 151,472 1,719 - 153,191
Other long-term liabilities 3,136 - - 3,136
Inter-company payable (receivable) (6,813) 6,813 - -
-----------------------------------------------------
Total liabilities 200,240 13,310 - 213,550
Stockholders' equity
Common stock 198 9,144 (9,144) 198
Additional paid-in capital 47,376 1,015 (1,015) 47,376
Treasury stock (14,581) - - (14,581)
Cumulative translation adjustments (151) - - (151)
Retained earnings 40,709 368 (368) 40,709
-----------------------------------------------------
Total stockholders' equity 73,551 10,527 (10,527) 73,551
-----------------------------------------------------
Total liabilities and stockholders' equity $273,791 $23,837 $(10,527) $287,101
=====================================================
</TABLE>
11
<PAGE>
<PAGE>
<TABLE>
Falcon Products, Inc.
Consolidating Balance Sheet
As of October 30, 1999
<CAPTION>
Total Total
Guarantor Non-Guarantor Eliminations Total
-----------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 899 $ 1,979 $ - $ 2,878
Accounts receivable 45,507 2,226 - 47,733
Inventories 44,436 4,642 - 49,078
Other current assets 4,200 880 - 5,080
-----------------------------------------------------
Total current assets 95,042 9,727 - 104,769
Property, plant and equipment, net 35,089 13,752 - 48,841
Investment in subsidiaries 10,604 - (10,604) -
Intangibles and other assets 138,596 - - 138,596
-----------------------------------------------------
Total assets $279,331 $23,479 $(10,604) $292,206
=====================================================
Liabilities and Stockholders' Equity
Current liabilities $ 53,355 $ 4,615 $ - $ 57,970
Long-term debt 160,222 1,841 - 162,063
Other long-term liabilities 2,872 - - 2,872
Inter-company payable (receivable) (6,419) 6,419 - -
-----------------------------------------------------
Total liabilities 210,030 12,875 - 222,905
Stockholders' equity
Common stock 198 9,144 (9,144) 198
Additional paid-in capital 47,376 1,015 (1,015) 47,376
Treasury stock (15,455) - - (15,455)
Cumulative translation adjustments (221) - - (221)
Retained earnings 37,403 445 (445) 37,403
-----------------------------------------------------
Total stockholders' equity 69,301 10,604 (10,604) 69,301
-----------------------------------------------------
Total liabilities and stockholders' equity $279,331 $23,479 $(10,604) $292,206
=====================================================
</TABLE>
12
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<PAGE>
<TABLE>
Falcon Products, Inc.
Consolidating Statement of Cash Flows
For the Twenty-Six Weeks Ended April 29, 2000
<CAPTION>
Total Total
Guarantor Non-Guarantor Eliminations Total
-----------------------------------------------------
<S> <C> <C> <C> <C>
Cash provided by (used in) operating activities $ 7,434 $(284) $ - $ 7,150
-----------------------------------------------------
Cash flows used in investing activities
Additions to property, plant and equipment, net (3,072) (397) - (3,469)
-----------------------------------------------------
Cash used in investing activities (3,072) (397) - (3,469)
-----------------------------------------------------
Cash flows used in financing activities
Common stock issuances 465 - - 465
Cash dividends (697) - - (697)
Repayment of long-term debt, net (3,056) (122) - (3,178)
-----------------------------------------------------
Cash used in financing activities (3,288) (122) - (3,410)
-----------------------------------------------------
Net change in cash and cash equivalents $ 1,074 $(803) $ - $ 271
=====================================================
</TABLE>
<TABLE>
Falcon Products, Inc.
Consolidating Statement of Cash Flows
For the Twenty-Six Weeks Ended May 1, 1999
<CAPTION>
Total Total
Guarantor Non-Guarantor Eliminations Total
-----------------------------------------------------
<S> <C> <C> <C> <C>
Cash used in operating activities $(1,070) $(787) $ - $(1,857)
-----------------------------------------------------
Cash flows used in investing activities
Additions to property, plant and equipment, net (1,492) (11) - (1,503)
-----------------------------------------------------
Cash used in investing activities (1,492) (11) - (1,503)
-----------------------------------------------------
Cash flows provided by (used in) financing activities
Common stock issuances 558 - - 558
Treasury stock purchases (3,025) - - (3,025)
Cash dividends (710) - - (710)
Additions to long-term debt, net 2,042 471 - 2,513
-----------------------------------------------------
Cash provided by (used in) financing activities (1,135) 471 - (664)
-----------------------------------------------------
Net change in cash and cash equivalents $(3,697) $(327) $ - $(4,024)
=====================================================
</TABLE>
13
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<PAGE>
Item 2. - Management's Discussion and Analysis of Results of Operations
-------------------------------------------------------------
and Financial Condition
-----------------------
Certain information presented herein includes "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. However, there can be no assurance that the
Company's actual results will not differ materially from its
expectations. The matters referred to in forward-looking statements may
be affected by risks and uncertainties affecting the Company's business.
The Company's results for the second quarter and twenty-six weeks
ending April 29, 2000 include Shelby Williams Industries, Inc. and its
subsidiaries ("Shelby Williams"). Shelby Williams was acquired during
June 1999 and was accounted for under the purchase method. Accordingly,
the results of operations of Shelby Williams are not included in the
reported results for the second quarter or twenty-six weeks ending May
1, 1999.
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 Twenty-Six Weeks
Ended Ended
----------------------- -----------------------
April 29, May 1, April 29, May 1,
2000 1999 2000 1999
--------- ------ --------- ------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 73.2 70.7 72.4 71.0
--------- ------ --------- ------
Gross margin 26.8 29.3 27.6 29.0
Selling, general and administrative expenses 16.3 19.8 17.0 19.5
--------- ------ --------- ------
Operating profit 10.5 9.5 10.6 9.5
Interest expense and other 5.3 .8 5.5 .8
--------- ------ --------- ------
Earnings before income taxes 5.2 8.7 5.1 8.7
Income tax expense 2.2 3.3 2.2 3.3
--------- ------ --------- ------
Net earnings 3.0% 5.4% 2.9% 5.4%
========= ====== ========= ======
</TABLE>
Thirteen weeks ended April 29, 2000, compared to the thirteen weeks
ended May 1, 1999
Net earnings were $2.3 million in the second quarter of fiscal
2000, compared to $2.0 million in the same period of fiscal 1999.
Increased operating profit from revenue growth was largely offset by
increased interest charges related to indebtedness incurred by the
Company to finance the Shelby Williams acquisition, which occurred in
June 1999. Net earnings per share were $.27 in 2000, and $.23 in 1999,
an increase of 17.4%. Weighted average shares outstanding increased to
8.8 million shares in the second quarter of 2000, from 8.7 million
shares in the second quarter of 1999.
14
<PAGE>
<PAGE>
Net sales for the second quarter of 2000 were $79.5 million, an
increase of 118.1% over the 1999 second quarter net sales of $36.5
million. This increase was primarily due to additional sales generated
by Shelby Williams.
Cost of sales was $58.2 million for the 2000 second quarter, an
increase of 125.8% from $25.8 million in the second quarter of 1999.
The increase was primarily the result of increased sales volume
generated by Shelby Williams. Gross margin increased to $21.3 million
for the second quarter of 2000, from $10.7 million in the same quarter
of 1999. Gross margin as a percentage of net sales was 26.8% in 2000,
compared to 29.3% in 1999. This decrease was primarily attributed to
the combining of the Shelby Williams' businesses, as Shelby Williams
earned a lower margin than the Company's historical business, partially
offset by cost-reduction efficiencies achieved by combining the two
companies.
Selling, general and administrative expenses were $13.0 million in
the second quarter of 2000, compared to $7.2 million in the second
quarter of 1999. The increase was primarily attributable to volume
associated with Shelby Williams. Selling, general and administrative
expenses as a percentage of net sales were 16.3% for the second quarter
of 2000, compared to 19.8% for the second quarter of 1999. The decrease
in the expense rate was primarily due to the acquisition of Shelby
Williams, which historically operated with a lower selling, general and
administrative expense structure than that of the Company's. The
decline also reflected cost savings gained through the integration of
Falcon and Shelby Williams.
Interest expense and other for the second quarter of 2000 was $4.2
million, compared to $.3 million in the second quarter of 1999. The
increase was associated with financing costs related to the Shelby
Williams acquisition.
The effective income tax rate for the second quarter of 2000 was
42.6% compared to 37.5% for the second quarter of 1999. The higher rate
included goodwill amortization associated with the acquisition of Shelby
Williams.
Twenty-six weeks ended April 29, 2000, compared to the twenty-six weeks
ended May 1, 1999
Net earnings were $4.4 million in the first half of 2000, compared
to $3.8 million in the same period of 1999. Increased operating profit
from revenue growth was largely offset by increased interest charges
related to indebtedness incurred by the Company to finance the Shelby
Williams acquisition. Net earnings per share were $.50 for the twenty-
six week period ending April 29, 2000, and $.43 for the period ending
May 1, 1999, an increase of 16.3%. Weighted average shares outstanding
decreased to 8.8 million shares in the first half of 2000, from 9.0
million shares in the first half of 1999.
Net sales for the twenty-six weeks ending April 29, 2000 increased
117.6% to $154.6 million, over the 1999 same-period net sales of $71.1
million. This increase was primarily due to additional sales generated
by Shelby Williams.
Cost of sales was $112.0 million for the first half of 2000, an
increase of 121.9% from $50.5 million in the first half of 1999. The
increase was primarily the result of increased sales volume generated by
Shelby Williams. Gross margin increased to $42.6 million for the first
half of 2000, from $20.6 million in the same period of 1999. Gross
margin as a percentage of net sales was 27.6% in 2000, compared to 29.0%
in 1999. This decrease was primarily attributed to the combining of the
Shelby Williams'
15
<PAGE>
<PAGE>
businesses, as Shelby Williams earned a lower margin than the Company's
historical business, partially offset by cost-reduction efficiencies
achieved by combining the two companies.
Selling, general and administrative expenses were $26.3 million in
the first half of 2000, compared to $13.8 million in the same period of
1999. The increase was primarily attributable to volume associated with
Shelby Williams. Selling, general and administrative expenses as a
percentage of net sales were 17.0% for the twenty-six weeks ended April
29, 2000, compared to 19.5% for the same period of 1999. The decrease
in the expense rate was primarily due to the acquisition of Shelby
Williams, which historically operated with a lower selling, general and
administrative expense structure than that of the Company's. The
decline also reflected cost savings gained through the integration of
Falcon and Shelby Williams.
Interest expense and other for the first half of 2000 was $8.6
million, compared to $.6 million in the first half of 1999. The
increase was associated with financing costs related to the Shelby
Williams acquisition.
The effective income tax rate for the first half of 2000 was 43.4%
compared to 37.7% for the first half of 1999. The higher rate included
goodwill amortization associated with the acquisition of Shelby
Williams.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at April 29, 2000, was $42.3 million
and its ratio of current assets to current liabilities was 1.7 to 1.0,
compared with $46.8 million and 1.8 to 1.0 at October 30, 1999.
The Company has a $50.0 million unsecured revolving line of credit
agreement with a group of financial institutions. The revolving line of
credit bears annual interest, at the Company's option, equal to the
Prime Rate, Federal Funds Rate or LIBOR in each case adjusted for a
spread based on the Company's leverage ratio. As of April 29, 2000,
there was no outstanding balance under the revolving line of credit.
The Company expects that it will meet its ongoing working capital
and capital requirements from a combination of existing cash, internally
generated funds and available borrowings under its revolving credit
facility. The Company's operating cash flows constitute its primary
internal source of liquidity.
Item 3. - Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Not applicable.
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
16
<PAGE>
<PAGE>
routine litigation incidental to the business, to which the Company is a
party or of which any of the Company's property is the subject.
Item 2. - Changes in Securities
---------------------
None.
Item 3. - Defaults Upon Senior Securities
-------------------------------
None.
Item 4. - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company held its Annual Meeting of Stockholders on March
16, 2000, for the purposes of electing three Class A
directors for a term expiring in 2003, and considering and
voting upon proposals to amend the Falcon Products, Inc.
Amended and Restated 1991 Stock Option Plan and the Falcon
Products, Inc. Non-Employee Director Stock Option Plan.
The number of votes for and withheld for each nominee for
director and the number of votes for, against and abstained
for the proposals to amend the Falcon Products, Inc. Amended
and Restated 1991 Stock Option Plan and the Falcon Products,
Inc. Non-Employee Director Stock Option Plan are as follows:
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
------- --------- --------------
<S> <C> <C>
Melvin F. Brown 6,948,233 598,006
James L. Hoagland 6,924,498 621,741
Lee M. Liberman 6,924,448 621,791
</TABLE>
<TABLE>
<CAPTION>
Votes For Votes Against Votes Abstained
--------- ------------- ---------------
<S> <C> <C> <C>
Amendment to the Falcon
Products, Inc. Amended and 4,418,270 958,299 989,252
Restated 1991 Stock Option Plan
<CAPTION>
Votes For Votes Against Votes Abstained
--------- ------------- ---------------
<S> <C> <C> <C>
Amendment to the Falcon
Products, Inc. Non-Employee 5,268,100 105,168 992,554
Director Stock Option Plan
</TABLE>
Item 5. - Other Information
-----------------
None.
17
<PAGE>
<PAGE>
Item 6. - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 27 - Financial Data Schedule (filed in EDGAR
version only), filed herewith.
(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.
FALCON PRODUCTS, INC.
Date: June 12, 2000 /s/ Franklin A. Jacobs
----------------------
Franklin A. Jacobs
Chief Executive Officer
and Chairman of the Board
Date: June 12, 2000 /s/ Michael J. Dreller
----------------------
Michael J. Dreller
Vice President and
Chief Financial Officer
18
