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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
FOR THE FISCAL YEAR ENDED OCTOBER 30, 1999
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 No.)
9387 DIELMAN INDUSTRIAL DRIVE, ST. LOUIS, MISSOURI 63132
(Address of principle executive offices)
Registrant's telephone number, including area code: (314) 991-9200
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, par value $.02 per share New York Stock Exchange
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/
As of January 18, 2000, the Registrant had outstanding 8,712,774
shares of Common Stock. The aggregate market value of the shares of
Common Stock held by nonaffiliates of the Registrant as of January 18,
2000, was $51.0 million based upon the closing stock price as reported
on the New York Stock Exchange on such date.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the
fiscal year ended October 30, 1999, are incorporated herein by reference
into Parts II and IV of this Report.
Portions of the Registrant's Proxy Statement for the 2000 Annual
Meeting of Stockholders to be held March 16, 2000, are incorporated
herein by reference into Part III of this Report.
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TABLE OF CONTENTS
PAGE
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PART I
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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 10
PART II
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ITEM 5. Market for the Registrant's Common Equity and
Related Stockholder Matters 11
ITEM 6. Selected Financial Data 12
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
ITEM 7A. Quantitative and Qualitative Disclosures About
Market Risk 12
ITEM 8. Financial Statements and Supplementary Data 12
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 12
PART III
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ITEM 10. Directors and Executive Officers of the Registrant 12
ITEM 11. Executive and Director Compensation 12
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management 12
ITEM 13. Certain Relationships and Related Transactions 12
PART IV
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ITEM 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 13
SIGNATURES 21
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EXHIBIT INDEX 22
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FALCON PRODUCTS, INC.
FORM 10-K
When used herein, the term "Company" refers to the Registrant,
Falcon Products, Inc., and its subsidiaries.
Information set forth in this Annual Report on Form 10-K regarding
expected or possible future events, including statements of the plans,
strategy, goals and objectives of management for future growth,
operations, prospects, products and services and statements relating to
future economic performance, is forward-looking and subject to risks and
uncertainties. For those statements, the Company claims the protection
of the safe harbor for forward-looking statements provided for by the
Private Securities Litigation Act of 1995. Factors that could affect the
future results of the Company and could cause those results to differ
materially from those expressed in the forward-looking statements are
discussed at greater length herein. See Item 7, "Management's Discussion
and Analysis of Results of Operations and Financial Condition."
PART I
ITEM 1. BUSINESS.
GENERAL
The Company designs, manufactures and markets an extensive line of
furniture and related products for the food service, office,
hospitality, healthcare and retail markets, including table bases, table
tops, metal and wood chairs, booths, casegoods and interior decor
systems. 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, architecture and design firms, office furniture dealers and end-
users, through a combination of its own direct factory sales force and
independent manufacturer's representatives.
PRODUCTS
The Company's principal products consist of an extensive line of
furniture and related products, including wood, metal and rattan chairs,
banquet and conference tables, table tops, table bases, booths,
casegoods and other related products.
Seating. The Company designs and manufactures a wide variety of
seating products, primarily for:
- dining, gaming, guest room, conference and banquet facilities;
- healthcare institutions and universities; and
- other institutional uses.
The Company markets its seating products under the Falcon,
Charlotte, Decor Concepts, KD/Context, Shelby Williams, The Chair
Source, and Thonet brand names.
Metal. Metal stacking chairs are available in a wide variety of
styles and are used primarily in multi-use function rooms, where it is
necessary to store chairs for events such as training courses and
banquets. Metal chairs may be upholstered in one of our standard
catalog vinyls or fabrics or in customer-furnished or customer-specified
materials and may be plated or powder coat painted in a standard catalog
finish or in a customer-designated custom finish.
Wood and Rattan. Wood chairs are manufactured in hardwoods, such
as maple, oak and beech, and are available in a wide variety of
finishes, upholstered fabric and vinyl coverings. Products are made of
solid wood or a combination of woods, and many are constructed with
bentwood components, which provide extended durability. Wood chair
products are finished on conveyorized lines which incorporate forced
drying cycles. Wood chairs are finished with one of our standard
colors or the customer may specify or supply its choice of finish
material. Sealer coats and final conversion varnish coats are applied
to our wood chairs by means of state-of-the-art, electrostatic
finishing systems which insure uniform application, resulting in a
durable chip-resistant finish. To fully complement our seating line,
the Company markets a wide collection of wicker and rattan seating
products.
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Banquet and Conference Tables. The Company designs and
manufactures banquet and conference tables, which along with our metal
stacking chairs are used primarily in multi-use function rooms. The
tables are constructed from the table tops and bases that the Company
manufactures as separate components and then either assembled for sale
as a complete table unit or sold to other furniture manufacturers as
separate components for their assembly operations. The Company markets
banquet and conference tables under the Falcon, King Arthur, Johnson
Tables and Howe brand names.
Table Tops. The Company manufactures table tops 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 edge, veneer and butcher block tops are
stained with one of the 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. The Company typically
sells table tops with a base the Company produces separately. Table
tops are marketed under the Falcon, Howe, Johnson Tables and Shelby
Williams brand names.
Table Bases. Table bases are produced in a variety of sizes,
styles and finishes and are used by restaurants, hotels, offices,
cafeterias, hospitals, airports, universities, country clubs and other
commercial locations where food is served. More than 35 styles of table
bases are finished to order in one of the standard catalog powder coat
paint finishes or designer plated finishes and also may be painted to
match a customer's custom finish requirements. The Company markets
table bases under the Falcon, Howe, Johnson Tables and Shelby Williams
brand names.
Booths. Booths are available in standard catalog styles or
customer-specified styles, some of which are suitable for outdoor
applications. The Company manufactures booths in wood, metal or
fiberglass, and our booths may be upholstered in one of the 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 our table tops
and other wood products. The Company markets booths under the Falcon,
Decor Concepts and Shelby Williams brand names.
Casegoods. The combination of the broad line of furniture
products and vertical manufacturing capabilities enable the Company to
offer a complete commercial interior decor package to its customers with
significant design flexibility and short lead times. The Company
integrates certain of its products into complete interior decor systems,
including all furniture, booths, walls, wood trim and casegood
components. These casegood components include such products as
counters, bars, divider walls, planter units, salad bars and stands,
which the Company produces in a variety of high-pressure laminates.
The Company then delivers these products to the customer site and
installs them using the Company's own employees or Company trained
subcontractors. The Company markets these products under the Falcon and
Decor Concepts brand names.
Other Products. The Company also manufactures portable dance
floors and platforms, food service carts, cutting room tables, as well
as a full range of vinyl wall coverings. The Company markets these
products under the Sellers & Josephson, King Arthur and Phillocraft
brand names.
MARKETING AND DISTRIBUTION
Domestic Sales of Furniture Products. The Company sells its
furniture products throughout the United States to a wide variety of
customers, including restaurant supply dealers, hospitality and food
service chains or their buying agencies, interior designers,
architectural design firms, office furniture dealers, mass
merchandisers, original equipment manufacturers ("OEMs") and chain
restaurants. These products are marketed through a combination of
direct factory sales representatives employed by the Company and
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 Vice President-Sales and Marketing, the Company's other
vice presidents who focus on individual markets, and the Company's
regional sales managers.
Each factory and independent sales representative is assigned a
territory in which to promote and sell the Company's products and assist
in resolution of any complaints with regard to his or her sales. The
Company determines the prices at which its products will be sold. The
Company's independent sales representatives are commissioned and do not
carry competing lines.
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The Company also markets its products through advertising in major
trade publications and illustrating the Company's products in its
catalogs. The Company publishes numerous extensive catalogs displaying
its products and distributes catalogs to architects, designers and
dealers. Catalogs are periodically supplemented as new products are
introduced. Customers may order standard products directly from these
catalogs or request changes to meet their design specifications.
The Company assists its representatives in various ways,
including:
- conducting extensive training programs to better educate its
sales representatives with respect to the design, manufacture,
variety and decor applications of its products;
- providing restaurant supply and office furniture dealers, mass
merchandisers, architectural designers, OEMs and other customers
with catalog materials, samples and brochures;
- maintaining a customer service department that ensures
that it promptly responds to the needs and orders of its
customers;
- exhibiting its products at national and regional furniture
shows and at two showrooms in the Merchandise Mart in Chicago;
- maintaining regular contact with key customers; and
- conducting 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 over 400
independent office furniture 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
food service furniture products. The Company utilizes its direct
factory sales force and independent sales representatives, under the
supervision of the Company's Vice President - Contract, to call upon
existing and prospective Flight dealers.
International Sales. The Company's products are marketed
throughout Europe through distribution agreements with a number of
European distributors. The Company's Falcon Mimon, a.s., subsidiary
located in Mimon, Czech Republic ("Falcon Mimon") also markets wood
chair frames directly. The Company's Howe Europe a/s, subsidiary
located in Middelfart, Denmark ("Howe Europe") markets, assembles and
distributes tables and chairs to the European contract office market for
training, conferencing, meeting and executive dining applications. The
Company holds the European distribution rights to the award-winning
40/4(TM) chair through an exclusive licensing agreement with David
Rowland, the chair's designer. The manufacturing capabilities of Falcon
Mimon, Howe Europe and the distribution network allow the Company to
take advantage of opportunities in Europe.
Distribution of the Company's products in Asia and the Pacific Rim
is achieved through distribution arrangements in Japan, Hong Kong, and
South Korea. The Company's Falcon Products (Shenzhen) Limited,
subsidiary located in Shenzhen, The Peoples Republic of China ("Falcon
China") markets table tops and millwork to support National Accounts
throughout the Asia Pacific region. The Company's international sales
efforts are supported by dedicated customer service personnel. During
1999, 1998 and 1997, foreign operations and export sales were $24.0,
$13.6 million, and $9.3 million, respectively. Of these amounts, $9.3
million, $8.7 million and $3.9 million of sales in 1999, 1998 and 1997,
respectively, were made directly from the Company's Falcon Mimon, Howe
Europe, and Falcon China locations.
National Accounts. The Company's National Accounts program
targets the major restaurant chains. The Company maintains a separate
National Accounts sales force consisting of both employee sales
representatives and independent sales representatives that are directed
by the Company's Vice President-National Accounts and regional sales
managers. The Company believes that its vertically integrated
manufacturing capabilities allow it to better serve these customers than
most of its competitors and that its design, installation and service
capabilities are particularly suited for many of these customers.
The National Accounts sales force develops original design concepts,
including seating layouts and product specifications for each customer
based on the customer's requirements. The Company's National Accounts
sales force is supported by its own customer service team, quotation and
design staff and product engineers, located at the Company's Newport,
Tennessee and City of Industry, California manufacturing facilities.
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PRODUCT DESIGN AND DEVELOPMENT
The Company's design and engineering group works with sales and
marketing personnel in support of the Company's complete decor 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
sales, marketing, purchasing, engineering 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 responsibility for new product
introductions and also identifies market trends and initiates product
development to accommodate those trends. The Company has full-time
product design engineers who report to the Product Development team and
are responsible for the design of new products. On occasion, product
designs are also purchased from outside sources to supplement the
Company's internal design capabilities.
MANUFACTURING
Company's manufacturing operations primarily consist of wood
bending, wood working, and finishing, assembly, metal forming, bending
and fabrication, electrostatic wood and metal finishing, robotic welding
and upholstering, in addition to printing and laminating vinyl wall
coverings. For certain chair styles, the Company purchases components
manufactured by other companies. These components, which are
manufactured to the Company's specification, are assembled, finished and
upholstered by the Company. For all other products, the company is a
vertically integrated manufacturer, which allows it to control all
aspects of its production processes. The Company has a fully
operational modern information system at all of its manufacturing
facilities. These systems perform detailed and timely cost analysis of
production by product and facility, which assists in controlling its
manufacturing processes and in better serving its customers.
All manufacturing operations emphasize quality control during the
various production processes. To provide consistency and speed to the
finishing process, the Company utilizes conveyorized paint lines with
spray booths and drying ovens positioned to allow proper drying times
between finishing steps. In addition, the Company has electrostatic
wood-finishing systems which provide superior finishing qualities and
are advantageous from an environmental standpoint. The Company has
invested in powder-coating lines which provide similar advantages for
the metal products, and expects to continue to invest in automated
machinery and equipment.
The Company's manufacturing facilities are strategically located
throughout the United States and internationally to meet the
requirements of its customers and its distribution network. The
Company's products are manufactured at its facilities in the United
States in Newport and Morristown, Tennessee, Belmont and Canton,
Mississippi, Statesville North Carolina, City of Industry, California,
and Englewood and Carlstadt, New Jersey, and internationally in Mimon,
Czech Republic, Juarez and Zacatecas, Mexico, Shenzhen, The People's
Republic of China and Middlefart, Denmark.
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,
plywood, rattan, laminates, particle board, metal tubing, steel wire,
scrap iron and various plastic components and other frame components,
from cushioning, vinyl and textiles, all of which the Company believes
are 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 at commercially reasonable terms should the need
arise.
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
manufacture these products and believes that alternative arrangements
could be made to obtain these products at commercially reasonable terms
should the need arise.
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BACKLOG
As of October 30, 1999, the Company's backlog of orders for its
products believed to be firm was approximately $59.8 million, as
compared to $23.5 million at October 31, 1998. Due to the Company's
short delivery time, backlog of orders is typically not considered a
significant measure of future sales.
COMPETITION
The office, food service, hospitality (including gaming),
university, healthcare and other institutional segments of the
commercial furniture industry are fragmented and highly competitive with
respect to each of the products sold 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 design, manufacture and install
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, 1999, the Company employed approximately 2,855
persons in its eight domestic manufacturing facilities and support
locations, 416 in its manufacturing facilities in Mexico, 9 in China,
32 in Denmark, and 319 in its manufacturing facility in Mimon, Czech
Republic. Approximately 239 persons were employed in sales, 127 persons
in administration and 3,265 in manufacturing.
TRADEMARKS AND PATENTS
The Company has registered the "FALCON"(R), "CHARLOTTE"(R),
"HOWE"(R), "JOHNSON TABLES"(R), "SHELBY WILLIAMS"(R), "KING ARTHUR"(R),
"STERNO"(R) (licensed in perpetuity), "THONET"(R), "PHILOCRAFT"(R), and
"SELLERS & JOSEPHSON"(R) trademarks, in addition to numerous other
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 mechanical patents on certain of its furniture
mechanisms and components. The Company believes that while its patents
and trademarks have value, it is not dependent upon patents, trademarks,
servicemarks or copyrights.
GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL MATTERS
The Company is subject to numerous environmental laws and
regulations in the various jurisdictions in which it operates that (a)
govern operations that may have adverse environmental effects, such as
discharges into air and water, as well as handling and disposal
practices for solid and hazardous wastes, and (b) impose liability for
response costs and certain damages resulting from past and current
spills, disposals or other releases of hazardous materials. The
Company's operations may result in noncompliance with or liability for
remediation pursuant to environmental laws. Environmental laws have
changed rapidly in recent years, and the Company may be subject to more
stringent environmental laws in the future. Although environmental
matters have not to date had a material adverse effect on the results of
operations or financial condition of the Company, the Company can give
no assurance that such matters will not have a material adverse effect
on the results of operation or financial condition or that more
stringent environmental laws will not be enacted which could have a
material adverse effect on its results of operations or financial
condition.
In February 1997, the King Arthur division of Shelby Williams
Industries, Inc. received a complaint, addressed to King Arthur, Inc.,
in a case pending in the Superior Court of New Jersey, Camden County,
Law Division, entitled Pennsauken Solid Waste Management Authority, et
al., vs. Ward Sand & Material Co., Inc. and a large number of other
defendants. The complaint, which identifies King Arthur, Inc. as one of
the defendants, alleges, among other things, that during the operation
of a landfill from the 1960's to 1984, the defendants improperly
generated, transported and/or disposed of certain hazardous waste
material, and that defendants are jointly and severally liable to
plaintiffs for all costs and damages incurred by plaintiffs for
remediation of the landfill and any surrounding areas which are found to
be contaminated. The complaint does not specify any dollar amount of
damages. Shelby Williams Industries, Inc. acquired certain assets of
King Arthur, Inc. in 1986. The Company believes, based on its present
knowledge, that the Company has valid defenses to the allegations in the
complaint, and that its liability, if any, is not material. The Company
has put its insurers on notice of the complaint.
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ACQUISITIONS
In June 1999, the Company acquired all of the common stock of
Shelby Williams Industries, Inc. and its subsidiaries ("Shelby
Williams") for a cash price of $137.1 million. Shelby Williams is a
leading manufacturer of contract seating for the commercial contract
furniture market. The Company used the purchase method of accounting to
record this acquisition. Accordingly, results of operations have been
included in the financial statements from the date of acquisition. The
purchase price was allocated to the assets and liabilities (on a
preliminary basis) based on estimated fair values at the date of
acquisition. This resulted in an excess of purchase price over assets
acquired of $99.2 million, which is being amortized on a straight line
basis over 40 years.
In March 1998, the Company acquired the stock of Howe Furniture
Corporation and its subsidiaries ("Howe") for $16.6 million in cash and
assumed $2.2 million in outstanding long-term obligations. Howe
specializes in the design, engineering and marketing of tables for the
contract office and hospitality markets. The Company used the purchase
method of accounting to record this acquisition. Accordingly, results
of operations have been included in the financial statements from the
date of acquisition. The excess of the purchase price over amounts
assigned to net tangible assets ($13.9 million) was recorded as
goodwill.
ITEM 2. PROPERTIES.
The following table provides information with respect to each of
the Company's manufacturing facilities:
<TABLE>
<CAPTION>
BUILDING AREA
LOCATION (SQUARE FEET) PRODUCTS LEASE/OWNERSHIP TERMS
- --------------------------- ------------- ----------------------------- ----------------------------------
<S> <C> <C> <C>
Domestic
St. Louis, Missouri 60,000 Principal executive offices. Leased, expiring in July 2015.
Morristown, Tennessee 744,000 Wood and metal chairs and Owned.
rattan/wicker products
Canton, Mississippi 406,000 Wood chairs Approximately 238,100 square
feet owned and 167,900 square
feet leased under certain
leases expiring from May
2000 to January 2009.
Newport, Tennessee 370,000 Table bases, table tops, Leased, (1) 300,000 square feet
millwork, casegoods, and expiring in December 2001, with
booths two five-year renewal options
and (2) 70,000 square feet
expiring in June 2001, with one
five-year renewal option.
Statesville, North Carolina 327,000 Wood and metal chairs Owned.
Belmont, Mississippi 227,000 Metal chairs and fiberglass Own 176,000 square feet in four
seating contiguous buildings; Lease
51,000 square feet expiring in
November 2003.
City of Industry, 179,000 Wood chairs, casegoods, and Leased, expiring in April 2006,
California fully upholstered seating with two five-year renewal
options.
Englewood, New Jersey 68,000 Wall coverings Leased, expiring December 2003,
with a 10 year renewal option.
Carlstadt, New Jersey 35,000 Wall coverings Leased, expiring April 2004.
Azusa, California 34,000 Fiberglass booths Leased, expiring in November 2002.
Foreign
Mimon, Czech Republic 700,000 Wood chairs Owned.
Zacatecas, Mexico 90,000 Wood chairs Owned.
Juarez, Mexico 51,000 Iron castings for table bases Owned.
Shenzhen, The Peoples 15,000 Table tops and millwork Leased, expiring July 31, 2000,
Republic of China with an annual renewal option.
Middelfart, Denmark 34,000 Tables and chairs Owned.
</TABLE>
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Management of the Company believes that its manufacturing and
warehousing facilities are in good condition, are adequately insured,
and are adequate for the purposes for which they are currently used.
The capacity of the Company's current facilities is considered to be
adequate to meet current needs and anticipated increases in sales volume
for the foreseeable future.
During calendar 1999, the Company closed manufacturing facilities
in Lewisville, Arkansas and Tijuana, Mexico, and the principal executive
offices of Shelby Williams in Chicago, Illinois.
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. 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.
In April 1999, the Internal Revenue Service issued a proposed
adjustment regarding an accumulated earnings tax liability of Shelby
Williams in the aggregate amount of approximately $4.7 million for the
fiscal years 1995 through 1997. The Company is contesting the proposed
adjustment and has reviewed the position of the IRS and believes it is
highly unlikely that the IRS will succeed in sustaining either all or a
material portion of such an adjustment.
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 fiscal year ended October 30, 1999.
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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT<F*>.
As of January 18, 2000, the Executive Officers of the Company are:
<TABLE>
<CAPTION>
NAME POSITION AGE
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<S> <C> <C>
Franklin A. Jacobs Chairman of the Board since 1971; President from 1957 to May 67
1981 and again from January 1984 to December 1995.
Darryl C. Rosser President and Chief Operating Officer since December 1995; 48
Executive Vice President-Operations from May 1995 to December 1995;
and Senior Vice President-Operations from December 1993 to May 1995.
Stephen E. Cohen Vice President - Sales and Marketing since August 1998; 31
Vice President - Sales from November 1996 to August 1998;
Vice President - Sales Western Region from October 1995 to November
1996; Vice President - Sales Midwestern Region from March 1995 to October
1995.
Michael J. Dreller Vice President-Finance and Chief Financial Officer, 37
Secretary and Treasurer since January 1996; Corporate Controller from
1993 to September 1995; prior to rejoining the Company, Vice President
and Chief Financial Officer of JDI Group, Inc., a distributor
of residential furniture, from September 1995 to December 1995.
Richard Hnatek Senior Vice President - Quality since September 1999 55
Senior Vice President - International Sales/New Chain Development
from August 1998 to September 1999; Senior Vice President - Sales from
December 1993 to August 1998.
Michael J. Kula Vice President - Corporate Technology & Development since 50
November 1998; Vice President - Operations from July 1996 to November
1998; prior to joining the Company, Senior Vice President- Operations of the
Gunlocke Company, a subsidiary of HON Industries, Inc. a manufacturer
of office furniture, from January 1994 to July 1996.
Jackson H. Spidell Vice President-Operations since November 1998; prior to joining 44
the Company, Director of West Michigan Manufacturing
Operations - Herman Miller, Inc., a manufacturer of office furniture,
for more than the last five years.
<FN>
Each officer is elected annually by the Board of Directors.
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<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.
</TABLE>
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
(a) Principal Market
The Company's common stock, par value $.02 per share, is listed on
the New York Stock Exchange under the symbol FCP.
(b) Stock Price and Dividend Information
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.
<TABLE>
<CAPTION>
MARKET PRICE
------------------------ DIVIDENDS
HIGH LOW PER SHARE
------ ------ ---------
<S> <C> <C> <C>
Year ended October 30, 1999:
First Quarter $12.75 $10.13 $.04
Second Quarter 11.25 7.13 .04
Third Quarter 11.56 8.00 .00
Fourth Quarter 10.50 8.00 .00
Year ended October 31, 1998:
First Quarter $15.56 $13.56 $.04
Second Quarter 13.68 12.88 .04
Third Quarter 13.50 12.12 .04
Fourth Quarter 13.13 10.00 .04
</TABLE>
Under the terms of the Company's Senior Secured Credit Facility
and the Indenture, as amended, pursuant to which the Company's
11-3/8% Senior Subordinated Notes due June 15, 2009, Series B,
have been issued, (the "Indenture"), the Company must comply with
certain covenants including, but not limited to, those related to
the payment of dividends and the maintenance of specific ratios.
Accordingly, the payment of future dividends will be subject to
the Company's compliance with these covenants and, assuming such
compliance, will be at the discretion of the Board of Directors.
(c) Approximate Number of Holders of Common Stock
The approximate number of holders of record of the Company's
common stock as of January 18, 2000, was 764.
(d) Recent Sales of Unregistered Securities
Concurrently with entering into the Senior Secured Credit
Facility, the Company issued $100.0 million of its 11-3/8% Senior
Subordinated Notes due June 15, 2009, Series A (the "Series A
Notes") to certain qualified institutional buyers based on the
exemptions from registration contained in Section 4 (2) of Rule
144A, promulgated under the Securities Act of 1933, as amended.
The proceeds from the issuance of the Series A Notes were used in
conjunction with the Senior Secured Credit Facility to finance the
Company's acquisition of Shelby Williams along with the fees and
expenses associated with the acquisition. On August 30, 1999, the
Company completed its offer to exchange its 11-3/8% Senior
Subordinated Notes due June 15, 2009, Series B (the "Series B
Notes") for its outstanding Series A Notes (the "Exchange Offer").
The terms of the Series B Notes are the same as the Series A
Notes, except that the Series B Notes have been registered under
the Securities Act of 1933, as amended, and the holders of the
Series B Notes are not entitled to any exchange or registration
rights with respect thereto. All of the outstanding Series A
Notes were exchanged for Series B Notes pursuant to the Exchange
Offer.
The Company issued 316,400 shares of common stock, (the 316,400
issued shares are hereafter referred to as the "Acquisition
Shares") in connection with its acquisition of the assets of The
Chair Source from The T.L. Spriggs Corporation. The Company
believes that the value of the acquired assets is commensurate
with the total value of the Acquisition Shares, which were valued
at approximately $4.35 million as of the acquisition date, October
28, 1996. The Acquisition Shares were exempt from registration
under Section 4(2) of the Securities Act of 1933, as amended, and
Regulation D promulgated thereunder.
- 11 -
<PAGE>
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data contained in the Registrant's Annual
Report for the fiscal year ended on October 30, 1999 (the "1999 Annual
Report") is incorporated herein by reference and contained herein as
Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The information contained under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in the 1999 Annual Report is incorporated herein by
reference and contained herein as Exhibit 13.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements together with the notes
thereto and the report of independent public accountants (as set forth
in Part IV, Item 14 (a) (1)) in the 1999 Annual Report are incorporated
herein by reference. The financial data contained under the caption
"Quarterly Financial Information" in the 1999 Annual Report is also
incorporated herein by reference and contained herein as Exhibit 13.
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 Registrant's Proxy Statement for the 2000 Annual
Meeting of Stockholders to be held March 16, 2000 (the "Proxy
Statement"), is incorporated herein by reference.
Information regarding executive officers of the Company is
contained in Part I, Item 4A hereof under the caption "Executive
Officers of the Registrant."
ITEM 11. EXECUTIVE AND DIRECTOR COMPENSATION.
The information contained under the captions "COMPENSATION OF
DIRECTORS", "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION", "EXECUTIVE COMPENSATION", "PENSION PLAN TABLE" and
"INFORMATION AS TO STOCK OPTIONS" in the Proxy Statement is incorporated
herein by 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 Proxy Statement is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the caption "TRANSACTIONS WITH
ISSUER AND OTHERS" in the Proxy Statement is incorporated herein by
reference.
- 12 -
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a) 1. Financial Statements
The following Consolidated Financial Statements of the Company
included in the 1999 Annual Report are incorporated by reference in Part
II, Item 8:
<TABLE>
<CAPTION>
ANNUAL REPORT
PAGE REFERENCE
--------------
<S> <C>
Consolidated Statements of Earnings for the years ended October 30, 1999,
October 31, 1998, and November 1, 1997 19
Consolidated Balance Sheets as of October 30, 1999, and October 31, 1998 20
Consolidated Statements of Stockholders' Equity for the years ended October 30,
1999, October 31, 1998, and November 1, 1997 21
Consolidated Statements of Cash Flows for the years ended October 30, 1999,
October 31, 1998, and November 1, 1997 22
Notes to Consolidated Financial Statements 23
Report of Independent Public Accountants 31
</TABLE>
(a) 2. Financial Statement Schedules
Report of Independent Public Accountants
The following financial statement schedules are included in
Item 14 on pages 15-20 of this Report:
Schedule I-Guarantor and Non-guarantor financial statements
for the years ended October 30, 1999, October 31, 1998, and
November 1, 1997
Schedule II-Valuation and Qualifying Accounts for the years
ended October 30, 1999, October 31, 1998, and November 1,
1997
(a) 3. Exhibits:
See Exhibit Index on pages 22 through 23 of this Report.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the
fourth quarter of the fiscal year ended October 30, 1999.
- 13 -
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
TO FALCON PRODUCTS, INC.:
We have audited in accordance with generally accepted auditing
standards, the financial statements included in Falcon Products, Inc.
1999 Annual Report to Stockholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated December 15, 1999.
Our audit was made for the purpose of forming an opinion on those
financial statements taken as a whole. Schedule I and Schedule II
included in this Form 10-K are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not part of the
basic financial statements. These schedules have been subjected to the
auditing procedures applied in our audit 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
St. Louis, Missouri,
December 15, 1999
- 14 -
<PAGE>
<PAGE>
FALCON PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE I-GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS
OCTOBER 30, 1999, OCTOBER 31, 1998 AND NOVEMBER 1, 1997
<TABLE>
Falcon Products, Inc.
Consolidating Statement of Earnings
For the Year Ended October 30, 1999
<CAPTION>
Total Total
Guarantor Non-Guarantor Eliminations Total
--------- ------------- ------------ -----
<S> <C> <C> <C> <C>
Net sales $212,668 $22,008 $(12,181) $222,495
Cost of sales, including nonrecurring items 156,832 19,341 (12,181) 163,992
Special and nonrecurring items 10,500 - - 10,500
Selling, general and administrative 37,684 1,605 - 39,289
-------- ------- -------- --------
Operating profit 7,652 1,062 - 8,714
Minority interest in consolidated subsidiary (24) - - (24)
Interest expense 7,189 92 - 7,281
-------- ------- -------- --------
Net earnings before income taxes 487 970 - 1,457
Income tax expense 569 304 - 873
-------- ------- -------- --------
Net earnings $ (82) $ 666 $ - $ 584
======== ======= ======== ========
<CAPTION>
Falcon Products, Inc.
Consolidating Statement of Earnings
For the Year Ended October 31, 1998
Total Total
Guarantor Non-Guarantor Eliminations Total
--------- ------------- ------------ -----
<S> <C> <C> <C> <C>
Net sales $135,742 $20,665 $(12,981) $143,426
Cost of sales, including nonrecurring items 97,801 18,247 (12,981) 103,067
Special and nonrecurring items 271 - - 271
Selling, general and administrative 27,225 2,257 - 29,482
-------- ------- -------- --------
Operating profit 10,445 161 - 10,606
Minority interest in consolidated subsidiary (64) - - (64)
Interest expense 546 73 - 619
-------- ------- -------- --------
Net earnings before income taxes 9,963 88 - 10,051
Income tax expense 3,668 33 - 3,701
-------- ------- -------- --------
Net earnings $ 6,295 $ 55 $ - $ 6,350
======== ======= ======== ========
<CAPTION>
Falcon Products, Inc.
Consolidating Statement of Earnings
For the Year Ended November 1, 1997
Total Total
Guarantor Non-Guarantor Eliminations Total
--------- ------------- ------------ -----
<S> <C> <C> <C> <C>
Net sales $109,105 $13,917 $(10,012) $113,010
Cost of sales, including nonrecurring items 76,003 13,516 (10,012) 79,507
Special and nonrecurring items 3,700 - 3,700
Selling, general and administrative 21,797 247 -- 22,044
-------- ------- -------- --------
Operating profit 7,605 154 -- 7,759
Minority interest in consolidated subsidiary (47) - -- (47)
Interest expense (income) (293) 154 -- (139)
-------- ------- -------- --------
Net earnings before income taxes 7,945 -- -- 7,945
Income tax expense 3,019 -- -- 3,019
-------- ------- -------- --------
Net earnings from continuing operations $ 4,926 $ -- $ -- $ 4,926
======== ======= ======== ========
</TABLE>
- 15 -
<PAGE>
<PAGE>
FALCON PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE I-GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS
OCTOBER 30, 1999, OCTOBER 31, 1998 AND NOVEMBER 1, 1997
<TABLE>
Falcon Products, Inc.
Consolidating Balance Sheet
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
Inventory 44,436 4,642 - 49,078
Other 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
Intercompany 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 adjustment (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>
- 16 -
<PAGE>
<PAGE>
FALCON PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE I-GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS
OCTOBER 30, 1999, OCTOBER 31, 1998 AND NOVEMBER 1, 1997
<TABLE>
Falcon Products, Inc.
Consolidating Balance Sheet
October 30, 1998
<CAPTION>
Total Total
Guarantor Non-Guarantor Eliminations Total
--------- ------------- ------------ -----
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 3,666 $ 1,520 $ - $ 5,186
Accounts receivable 20,472 2,211 - 22,683
Inventories 20,922 3,955 - 24,877
Other current assets 2,760 321 - 3,081
-------- ------- ------- --------
Total current assets 47,820 8,007 - 55,827
Property plant and equipment, net 18,362 9,136 - 27,498
Investment in subsidiaries 7,150 - (7,150) -
Intangibles and other assets 28,649 - - 28,649
-------- ------- ------- --------
Total assets $101,981 $17,143 $(7,150) $111,974
======== ======= ======= ========
Liabilities and Stockholders' Equity
Current liabilities $ 16,143 $ 3,928 $ - $ 20,071
Long-term debt 17,208 - - 17,208
Other long-term liabilities 2,749 - - 2,749
Intercompany payable (receivable) (6,065) 6,065 - -
-------- ------- ------- --------
Total liabilities 30,035 9,993 - 40,028
-------- ------- ------- --------
Stockholders' equity
Common stock 198 6,446 (6,446) 198
Additional paid-in capital 47,376 925 (925) 47,376
Treasury stock (13,557) - - (13,557)
Cumulative translation adjustment (19) - - (19)
Retained earnings 37,948 (221) 221 37,948
-------- ------- ------- --------
Total stockholders' equity 71,946 7,150 (7,150) 71,946
-------- ------- ------- --------
Total liabilities and stockholders' equity $101,981 $17,143 $(7,150) $111,974
======== ======= ======= ========
</TABLE>
- 17 -
<PAGE>
<PAGE>
FALCON PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE I-GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS
OCTOBER 30, 1999, OCTOBER 31, 1998 AND NOVEMBER 1, 1997
<TABLE>
Falcon Products, Inc.
Consolidating Statement of Cash Flows
For the Year Ended October 30, 1999
<CAPTION>
Total Total
Guarantor Non-Guarantor Eliminations Total
--------- ------------- ------------ -----
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 4,230 $ 726 $ - - $ 4,956
Cash flows used in investing activities
Acquisition, net of cash (136,870) (231) - - (137,101)
Capital expenditures, net (4,368) (1,877) - - (6,245)
--------- ------- ------- ---------
Net cash used in investing activities (141,238) (2,108) - - (143,346)
Cash flows used in financing activities
Common stock issuance 700 -- - - 700
Treasury stock purchases (3,017) -- - - (3,017)
Cash dividends (710) -- - - (710)
Additions to long-term debt, net 143,850 1,841 - - 145,691
Debt issuance costs (6,582) -- - - (6,582)
--------- ------- ------- ---------
Net cash provided by financing activities 134,241 1,841 - - 136,082
--------- ------- ------- ---------
Net change in cash and cash equivalents $ (2,767) $ 459 $ - - $ (2,308)
========= ======= ======= =========
<CAPTION>
Falcon Products, Inc.
Consolidating Statement of Cash Flows
For the Year Ended October 31, 1998
Total Total
Guarantor Non-Guarantor Eliminations Total
--------- ------------- ------------ -----
<S> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities $ (785) $1,079 $ - $ 294
Cash flows used in investing activities
Acquisition, net of cash (16,457) 495 - (15,962)
Capital expenditures, net (845) (579) - (1,424)
-------- ------ ----- --------
Net cash used in investing activities (17,302) (84) - (17,386)
Cash flows used in financing activities
Common stock issuance 137 - - 137
Treasury stock purchases (7,473) - - (7,473)
Cash dividends (1,457) - - (1,457)
Additions to long-term debt, net 14,777 - - 14,777
-------- ------ ----- --------
Net cash provided by financing activities 5,984 - - 5,984
-------- ------ ----- --------
Net change in cash and cash equivalents $(12,103) $ 995 $ - $(11,108)
======== ====== ===== ========
</TABLE>
- 18 -
<PAGE>
<PAGE>
FALCON PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE I-GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS
OCTOBER 30, 1999, OCTOBER 31, 1998 AND NOVEMBER 1, 1997
<TABLE>
Falcon Products, Inc.
Consolidating Statement of Cash Flows
For the Year Ended November 1, 1997
<CAPTION>
Total Total
Guarantor Non-Guarantor Eliminations Total
--------- ------------- ------------ -----
<S> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities $ 4,848 $(1,586) $ - $ 3,262
Cash flows used in investing activities
Proceeds from the sale of discontinued
operations 17,711 -- - 17,711
Capital expenditures, net (3,807) -- - (3,807)
------- ------- ----- -------
Net cash provided by investing activities 13,904 -- - 13,904
Cash flows used in financing activities
Common stock issuance (114) 1,689 - 1,575
Treasury stock purchases (7,202) -- - (7,202)
Cash dividends (1,348) -- - (1,348)
Additions to long-term debt, net 389 -- - 389
------- ------- ----- -------
Net cash provided by (used in)
financing activities (8,275) 1,689 - (6,586)
------- ------- ----- -------
Net change in cash and cash equivalents $10,477 $ 103 $ - $10,580
======= ======= ===== =======
</TABLE>
- 19 -
<PAGE>
<PAGE>
FALCON PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
OCTOBER 30, 1999, OCTOBER 31, 1998, AND NOVEMBER 1, 1997
<TABLE>
<CAPTION>
ADDITIONS
BALANCE CHARGED ACQUISITIONS
AT TO COSTS FROM DEDUCTIONS BALANCE
BEGINNING AND ACQUIRED FROM AT END OF
(IN THOUSANDS) OF PERIOD EXPENSES COMPANIES RESERVES PERIOD
- -------------- --------- --------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
and anticipated returns:
Year ended October 30, 1999 $672 $324 $918 $562<FA> $1,352
==== ==== ==== ==== ======
Year ended October 31, 1998 $337 $824 $317 $806<FA> $672
==== ==== ==== ==== ======
Year ended November 1, 1997 $392 $710 $ -- $765<FA> $337
==== ==== ==== ==== ======
<FN>
- ---------
<FA> Accounts charged off less recoveries and returns.
<CAPTION>
ADDITIONS
BALANCE CHARGED ACQUISITIONS
AT TO COSTS FROM DEDUCTIONS BALANCE
BEGINNING AND ACQUIRED FROM AT END OF
(IN THOUSANDS) OF PERIOD EXPENSES COMPANIES RESERVES PERIOD
- -------------- --------- --------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
1997 Plant Consolidation Reserve:
Year ended October 30, 1999 $ -- $ -- $ -- $ -- $ --
====== ====== ==== ====== ======
Year ended October 31, 1998 $2,091 $ (440)<FB> $ -- $1,651 $ --
====== ====== ==== ====== ======
Year ended November 1, 1997 $ -- $3,700 $ -- $1,609 $2,091
====== ====== ==== ====== ======
<FN>
- ---------
<FB> Adjustment of estimate
<CAPTION>
ADDITIONS
BALANCE CHARGED ACQUISITIONS
AT TO COSTS FROM DEDUCTIONS BALANCE
BEGINNING AND ACQUIRED FROM AT END OF
(IN THOUSANDS) OF PERIOD EXPENSES COMPANIES RESERVES PERIOD
- -------------- --------- --------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
1998 Special and Nonrecurring
Item Reserve:
Year ended October 30, 1999 $410 $ -- $-- $ 410 $ --
==== ====== === ====== ====
Year ended October 31, 1998 $ -- $4,650 $-- $4,240 $410
==== ====== === ====== ====
Year ended November 1, 1997 $ -- $ -- $-- $ -- $ --
==== ====== === ====== ====
<CAPTION>
ADDITIONS
BALANCE CHARGED ACQUISITIONS
AT TO COSTS FROM DEDUCTIONS BALANCE
BEGINNING AND ACQUIRED FROM AT END OF
(IN THOUSANDS) OF PERIOD EXPENSES COMPANIES RESERVES PERIOD
- -------------- --------- --------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
1999 Special and Nonrecurring
Item Reserve:
Year ended October 30, 1999 $-- $14,000 $-- $12,434 $1,566
=== ======= === ======= ======
Year ended October 31, 1998 $-- $ -- $-- $ -- $ --
=== ======= === ======= ======
Year ended November 1, 1997 $-- $ -- $-- $ -- $ --
=== ======= === ======= ======
</TABLE>
- 20 -
<PAGE>
<PAGE>
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 26, 2000 By /s/ Franklin A. Jacobs
-----------------------------------
Franklin A. Jacobs,
Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Falcon Products, Inc.,
hereby severally and individually constitute and appoint Franklin A.
Jacobs and Michael J. Dreller, and each of them, the true and lawful
attorneys and agents of each of us to execute in the name, place and
stead of each of us (individually and in any capacity stated below) any
and all amendments to this Annual Report on Form 10-K and all
instruments necessary or advisable in connection therewith and to file
the same with the Securities and Exchange Commission, each of said
attorneys and agents to have the power to act with or without the others
and to have full power and authority to do and perform in the name and
on behalf of each of the undersigned every act whatsoever necessary or
advisable to be done in the premises as fully and to all intents and
purposes as any of the undersigned might or could do in person, and we
hereby ratify and confirm our signatures as they may be signed by our
said attorneys and agents or each of them to any and all such amendments
and instruments.
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 26, 2000 /s/ Franklin A. Jacobs
--------------------------------------------
Franklin A. Jacobs,
Chairman of the Board,
Chief Executive Officer
And Director
(Principal Executive Officer)
Date: January 26, 2000 /s/ Michael J. Dreller
--------------------------------------------
Michael J. Dreller,
Vice President, Chief Financial
Officer, Secretary and Treasurer
(Principal Financial and Accounting
Officer)
Date: January 26, 2000 /s/ Raynor E. Baldwin
--------------------------------------------
Raynor E. Baldwin, Director
Date: January 26, 2000 /s/ Melvin F. Brown
--------------------------------------------
Melvin F. Brown, Director
Date: January 26, 2000 /s/ Donald P. Gallop
--------------------------------------------
Donald P. Gallop, Director
Date: January 26, 2000 /s/ James L. Hoagland
--------------------------------------------
James L. Hoagland, Director
Date: January 26, 2000 /s/ S. Lee Kling
--------------------------------------------
S. Lee Kling, Director
Date: January 26, 2000 /s/ Lee M. Liberman
--------------------------------------------
Lee M. Liberman, Director
Date: January 26, 2000 /s/ Darryl C. Rosser
--------------------------------------------
Darryl C. Rosser, Director
Date: January 26, 2000 /s/ James Schneider
--------------------------------------------
James Schneider, Director
- 21 -
<PAGE>
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger dated as of May 5, 1999 among the Registrant, SY
Acquisition, Inc. ("Purchaser") and Shelby Williams Industries, Inc. (the "Merger
Agreement") filed as Exhibit (c) (1) to the Schedule 14D-1/Schedule 13D filed May
12, 1999, by Purchaser and Registrant (the "Schedule") and incorporated herein by this
reference.
2.2 Supplement to the Merger Agreement dated May 5, 1999 filed as Exhibit (c) (2) of the
Schedule, and incorporated herein by this reference.
3.1 Restated Certificate of Incorporation of the Company, filed as Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the quarterly period
ended April 27, 1996 (the "April 27, 1996 10-Q").
3.2 Restated Bylaws, filed as Exhibit 3.2 to the April 27, 1996 10-Q.
3.3 Amendment to Restated Bylaws, effective January 16, 1997, filed as Exhibit 3.3
to the Company's Annual Report on Form 10-K for the year ended November 2, 1996.
4.1 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.
4.2 Indenture, dated as of June 17, 1999, by and among the Company, the Bank of New York
and the guarantors named therein, incorporated herein by reference to Exhibit 4.2 of
the Company's Registration Statement on Form S-4 (File No. 333-83207).
4.3 Supplemental Indenture, dated as of June 18, 1999, by and among Shelby
Williams Industries, Inc. Sellers & Josephson, Inc., Madison Furniture
Industries, Inc., the Company, the guarantors named therein and the Bank of New York,
incorporated herein by reference to Exhibit 4.3 of the Company's Registration
Statement on Form S-4 (File No. 333-83207).
4.4 Form of 11-3/8% Senior Subordinated Note due 2009, Series B, incorporated
herein by reference to Exhibit 4.4 of the Company's Registration
Statement on Form S-4 (File No. 333-83207).
4.5 A/B Exchange Registration Rights Agreement, dated as of June 17, 1999, by
and among the Company, the guarantors named therein, and Donaldson,
Lufkin & Jenrette Securities Corporation, incorporated herein by reference to
Exhibit 4.5 of the Company's Registration Statement on Form S-4 (File No.
333-83207).
10.1 Credit Agreement, dated as of June 17, 1999, of the Company, incorporated herein by
reference to Exhibit 10.18 of the Company's Registration Statement on Form S-4 (File
No. 333-83207).
10.2 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 (the "1980 10-K").
10.3 Assignment and Assumption Agreement dated January 30, 1980, and the lease
thereunder, incorporated herein by reference to Exhibit 10(g) to 1980 10-K.
10.4 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.
10.5 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 (the "1991 10-K").
10.6<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.
10.7<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 (the "1986 10-K").
- 22 -
<PAGE>
<PAGE>
10.8<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
1986 10-K.
10.9<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.
10.10<Fa> Falcon Products, Inc. Amended and Restated 1991 Stock Option Plan, incorporated
herein by reference to Exhibit 4.1 to the Company's Registration Statement
on Form S-8, Reg. No. 33-46997.
10.11<Fa> Falcon Products, Inc. Amended and Restated Stock Purchase Plan, incorporated
herein by reference to Exhibit 10.15 to 1991 10-K.
10.12<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.
10.13 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").
10.14<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.
10.15<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").
10.16 Amendment to the Debt Agreement dated as of September 24, 1993, incorporated
herein by reference to Exhibit 10.20 to the 1993 10-K.
10.17 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").
10.18 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.
10.19<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.
10.20 Amendment to the Non-Employee Director Stock Option Plan, incorporated herein by
reference to Exhibit 10.26 to the April 27, 1996 10-Q.
10.21<Fa> Falcon Products, Inc. Employee Stock Purchase Plan, incorporated herein by
reference to Exhibit 10.27 to the Company's Annual Report on Form 10-K for the year
ended November 1, 1997 (the "1997 10-K").
10.22<Fa> Falcon Products, Inc. Non-Employee Directors' Deferred Compensation Plan,
incorporated herein by reference to Exhibit 10.28 to the 1997 10-K.
13 Selected Portions of the Annual Report to Stockholders for the year ended October
30, 1999, filed herewith.
21 Subsidiaries of the Company, filed herewith.
23 Consent of Independent Public Accountants, filed herewith.
24 Power of Attorney (included on Signature Page hereto).
27 Financial Data Schedule (filed in EDGAR version only).
<FN>
- ---------
<Fa> Management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14(c) of Form 10-K.
</TABLE>
- 23 -
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the audited
Consolidated Financial Statements and the notes thereto.
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.
Continuing Operations
During the last several years, the Company has made two significant
acquisitions as part of its long-term strategic plan to consolidate its
industry and to create the single premier supplier to the commercial
contract furniture market. In 1999, the Company acquired Shelby Williams
Industries, Inc. (Shelby Williams), a leading manufacturer of contract
seating primarily for the hospitality market. The acquisition positioned
the Company as the industry leader. In 1998, the Company acquired Howe
Furniture Corporation (Howe). Howe specializes in the design,
engineering and marketing of tables for the contract and hospitality
markets.
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>
Operating Results as a Percentage of Sales October 30, 1999 October 31, 1998 November 1, 1997
========================================================================================================================
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
- ------------------------------------------------------------------------------------------------------------------------
Cost of sales, including nonrecurring items 73.7 71.8 70.3
- ------------------------------------------------------------------------------------------------------------------------
Special and nonrecurring items 4.7 0.2 3.3
- ------------------------------------------------------------------------------------------------------------------------
Gross margin 21.6 28.0 26.4
- ------------------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses 17.7 20.6 19.5
- ------------------------------------------------------------------------------------------------------------------------
Operating profit 3.9 7.4 6.9
- ------------------------------------------------------------------------------------------------------------------------
Interest expense (income), net 3.2 .4 (0.1)
- ------------------------------------------------------------------------------------------------------------------------
Minority interest in consolidated subsidiary -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before income taxes 0.7 7.0 7.0
- ------------------------------------------------------------------------------------------------------------------------
Income tax expense 0.4 2.6 2.6
- ------------------------------------------------------------------------------------------------------------------------
Net earnings from continuing operations 0.3 4.4 4.4
========================================================================================================================
Supplemental Information - Before Special and Nonrecurring Items
- ------------------------------------------------------------------------------------------------------------------------
Gross margin 27.9% 30.4% 29.7%
- ------------------------------------------------------------------------------------------------------------------------
Operating profit 10.2 9.8 10.1
- ------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before income taxes 6.9 9.5 10.2
- ------------------------------------------------------------------------------------------------------------------------
Net earnings from continuing operations 4.2 6.0 6.4
========================================================================================================================
</TABLE>
Net Sales
In 1999, net sales from continuing operations were $222.5 million, an
increase of 55.1% over 1998 net sales of $143.4 million. The sales
increase over the prior year primarily is the result of the Shelby
Williams acquisition and increased sales to the national accounts and
contract office markets. Management believes that the addition of the
Shelby Williams sales force and customer relationships will be excellent
assets for the Company.
Net sales from continuing operations in 1998 were $143.4 million,
an increase of 26.9% over 1997 net sales of $113.0 million. The sales
increase over the prior year primarily resulted from the Howe
acquisition and increased sales to the hospitality market.
Costs and Expenses
The Company's reported operating results for fiscal years 1999, 1998 and
1997 included special and nonrecurring items associated with various
strategic initiatives the Company has undertaken. Those items make
direct comparisons of the reported results difficult.
During 1999, in conjunction with the acquisition of Shelby
Williams, the Company recorded a pre-tax integration charge of $14.0
million, $8.7 million after taxes or $0.97 per share, to cover the
anticipated costs of combining its existing business with the acquired
business. The charge relates to closing certain manufacturing facilities
and transferring production from the closed facilities into the
Company's existing facilities.
16
<PAGE>
<PAGE>
This one-time charge includes costs associated with asset write-downs
and dispositions, real estate exit costs, employee severance, and other
related costs associated with exiting the closed facilities. Cost of
sales includes a $3.5 million charge to write down the carrying value of
inventory with the remaining components of the charge being reported in
the Special and Nonrecurring Items in the accompanying Consolidated
Statements of Earnings.
During 1998, the Company recorded a $4.7 million pre-tax charge,
$2.9 million after-tax or $.32 per share, related to management's
decision to discontinue the Company's hotel casegoods line of business.
The charge entailed the writedown of assets, including inventories,
equipment and goodwill, associated with the product line located in the
Tijuana, Mexico, facility. Cost of sales includes a $3.3 million pre-tax
charge to write down the carrying value of inventory. The remaining
components of the charge have been reported in Special and Nonrecurring
Items in the Consolidated Statements of Earnings.
Also during 1998, the Company recorded a $1.3 million pre-tax
gain, $0.8 million after-tax or $.09 per share, on the sale of the
Company's corporate headquarters building. The gain has been reported in
Special and Nonrecurring Items in the Consolidated Statements of
Earnings.
During the fourth quarter of 1998, the Company recorded an
additional pre-tax charge of $0.2 million, $0.1 million after-tax or
$.01 per share, related to the consolidation of the Company's
manufacturing facilities that was announced in 1997. These charges are
reported in Special and Nonrecurring Items in the Consolidated
Statements of Earnings.
During 1997, the Company recorded a pre-tax charge of $3.7
million, $2.3 million after-tax or $.23 per share, for charges
associated with the announced consolidation of the Company's
manufacturing operations at its Anaheim, California, and Belding,
Michigan, facilities into its City of Industry, California, facility and
the elimination of several duplicative and nonperforming wood seating
product lines. These charges are reported in Special and Nonrecurring
Items in the Consolidated Statements of Earnings.
During 1999, the Company's gross margin increased to $48.0
million, or 19.7% over 1998's gross margin of $40.1 million, primarily
due to increased sales volume. Gross margin as a percent of sales,
excluding the special and nonrecurring items decreased to 27.9% in 1999
from 30.4% in 1998. The decrease was primarily attributed to the
addition of the Shelby Williams' business, as Shelby Williams' historic
gross margins were lower than the Company's historic gross margins.
Also, combining the business resulted in excess manufacturing capacity,
and as a result, the Company decided to close its Lewisville, Arkansas,
City of Industry, California, and the Tijuana, Mexico, facilities. These
closings negatively impacted the gross margin percentage for the year,
although the Company expects significant future benefits from these
closings.
In 1998, the Company's gross margin increased to $40.1 million
from $29.8 million in 1997, a 34.5% increase which was primarily due to
increased sales volume. Gross margin as a percent of sales, excluding
the special and nonrecurring items, increased to 30.4% in 1998 from
29.7% in 1997. The increase is primarily due to product mix and
incremental sales from the Howe acquisition which maintained a higher
gross margin percentage than the Company's historical business. In
addition, during the first half of 1998, the Company consolidated the
Belding, Michigan, and Anaheim, California, facilities into the City of
Industry, California, facility to benefit from economies of scale and
further reduce its fixed overhead costs. During the fourth quarter of
1998, the Company began to exit the hotel casegoods market which began
to have a favorable impact on the gross margin percentage during the
quarter.
Selling, general and administrative expenses were $39.3 million,
$29.5 million and $22.0 million in 1999, 1998 and 1997, respectively.
The overall increase is principally related to the aforementioned
acquisitions, higher level of business and increased sales and marketing
programs including salaries, commissions, travel and literature. As a
percentage of net sales, the expense rate was 17.7% in 1999, 20.6% in
1998 and 19.5% in 1997. The decrease in the expense rate in 1999 is
primarily due to the Shelby Williams acquisition which previously
maintained a lower expense rate than the Company and cost savings
resulting from the elimination of duplicative selling and administrative
expenses from combining the two businesses.
The increase in the expense rate in 1998 compared with 1997 was
primarily due to the Howe acquisition which previously maintained a
higher expense rate than the Company.
Interest and Taxes
Net interest expense was $7.3 million in 1999, compared with $0.6
million in 1998 and interest income of $0.1 million in 1997. The
increased interest expense in 1999 was due to outstanding borrowings as
a result of the Shelby Williams acquisition, the interest expense in
1998 was due to the Howe acquisition. The interest income during 1997
was due primarily to interest received on the proceeds from the sale of
the William Hodges division in late 1997.
Income tax expense was $0.9 million, $3.7 million and $3.0 million
in 1999, 1998 and 1997, respectively. The effective
17
<PAGE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results
of Operations
income tax rate was 59.9% in 1999, 36.8% in 1998, and 38.0% in 1997. The
higher effective tax rate in 1999 is due to nondeductible goodwill
charges representing a greater percentage of pre-tax earnings.
Net Earnings
Net earnings from operations decreased to $0.6 million, or $0.07 per
share, in 1999 from $6.4 million, or $0.68 per share, in 1998. The
decrease is due to the special and nonrecurring charge in 1999 related
to the integration of the Shelby Williams business. Excluding special
and nonrecurring items, net earnings were $9.3 million, or $1.04 per
share in 1999, compared with $8.6 million, or $0.92 per share, in 1998.
Excluding special and nonrecurring items, net earnings increased 8.0%
while earnings per share increased 13.0%.
Net earnings from continuing operations in 1998 increased to $6.4
million, or $.68 per share, from $4.9 million, or $.50 per share, in
1997, an increase in earnings and earnings per share of 28.9% and 36.0%,
respectively. In 1998, net earnings were $6.4 million, compared with
$12.6 million in 1997, a decrease of 49.7%. Net earnings per share was
$.68 in 1998, compared with $1.28 in 1997, a 46.9% decrease. The
decrease was primarily due to the gain recognized from the sale of the
William Hodges division in 1997.
Excluding the special and nonrecurring items reported in both 1998
and 1997, net earnings from continuing operations were $8.6 million, or
$.92 per share, compared with $7.2 million, or $.73 per share, in 1997,
resulting in an increase in earnings of 18.8% and an increase in
earnings per share of 26.0%.
Liquidity and Capital Resources
The Company's working capital at October 30, 1999, was $46.8 million and
its ratio of current assets to current liabilities was 1.8 to 1.0. Cash
provided by operating activities was $5.0 million in 1999 and $0.3
million in 1998.
Cash used by investing activities in 1999 was $143.3 million,
compared with $17.4 million in 1998. The increase is due to the
acquisition of Shelby Williams. The Company invested $6.2 million in
1999 and $6.6 million in 1998 in capital additions primarily to increase
manufacturing capacities and to improve operating efficiencies, as well
as normal recurring capital replacements. The Company's capital budget
for 2000 is approximately $6.5 million, which will be used primarily to
acquire new equipment.
Cash provided by financing activities was $136.1 million in 1999,
compared with $6.0 million in 1998. The increase in 1999 is due
primarily to borrowings under new credit facilities to finance the
Shelby Williams acquisition. During 1999 and 1998, the Company acquired
349,100 and 567,000 shares of its common stock, respectively, at a total
cost of $3.0 million and $7.5 million, respectively. The Company is
authorized to purchase up to 441,000 additional shares of its common
stock under the stock repurchase plan approved by the Board of
Directors.
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, at the Prime Rate,
Federal Funds Rate or LIBOR adjusted for a spread based on the Company's
leverage ratio. As of October 30, 1999, 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.
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.
Recently Issued Accounting Standards
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activity" provides comprehensive and consistent standards for the
recognition and measurement of derivative and hedging activities. It
requires that derivatives be recorded on the Statement of Consolidated
Financial Position at fair value and establishes criteria for hedges of
changes in the fair value of assets, liabilities or firm commitments,
hedges of variable cash flows of forecasted transactions, and hedges of
foreign currency exposures of net investments in foreign operations.
Changes in the fair value of derivatives that do not meet the criteria
for hedges would be recognized in the Statement of Consolidated Income.
The standard will be effective for the Company beginning November 3,
2001. The Company does not expect the adoption of SFAS No. 133 to have a
material effect on the consolidated financial statements.
18
<PAGE>
<PAGE>
Consolidated Statements of Earnings
For the Years Ended October 30, 1999, October 31, 1998, and November 1, 1997
<TABLE>
<CAPTION>
In thousands, except per-share data 1999 1998 1997
========================================================================================================================
<S> <C> <C> <C>
Net sales $222,495 $143,426 $113,010
Cost of sales, including nonrecurring items 163,992 103,067 79,507
Special and nonrecurring items 10,500 271 3,700
- ------------------------------------------------------------------------------------------------------------------------
Gross margin 48,003 40,088 29,803
Selling, general and administrative expenses 39,289 29,482 22,044
- ------------------------------------------------------------------------------------------------------------------------
Operating profit 8,714 10,606 7,759
Interest expense (income), net; including interest income of
$225, $264 and $228, respectively 7,281 619 (139)
Minority interest in consolidated subsidiary (24) (64) (47)
- ------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before income taxes 1,457 10,051 7,945
Income tax expense 873 3,701 3,019
- ------------------------------------------------------------------------------------------------------------------------
Net earnings from continuing operations 584 6,350 4,926
Discontinued operations, net of tax -- -- 938
Gain on sale of discontinued operations, net of tax -- -- 6,770
- ------------------------------------------------------------------------------------------------------------------------
Net earnings $ 584 $ 6,350 $ 12,634
========================================================================================================================
Earnings per share - Basic:
Continuing operations $ 0.07 $ 0.69 $ 0.51
Discontinued operations -- -- 0.10
Gain on sale of discontinued operations -- -- 0.70
- ------------------------------------------------------------------------------------------------------------------------
Net earnings per share $ 0.07 $ 0.69 $ 1.31
========================================================================================================================
Earnings per share - Diluted:
Continuing operations $ 0.07 $ 0.68 $ 0.50
Discontinued operations -- -- 0.09
Gain on sale of discontinued operations -- -- 0.69
- ------------------------------------------------------------------------------------------------------------------------
Net earnings per share $ 0.07 $ 0.68 $ 1.28
========================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
19
<PAGE>
<PAGE>
Consolidated Balance Sheets
For the Years Ended October 30, 1999, and October 31, 1998
<TABLE>
<CAPTION>
In thousands, except per-share data 1999 1998
========================================================================================================================
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,878 $ 5,186
Accounts receivable, less allowances of $1,352 and $672, respectively 47,733 22,683
Inventories 49,078 24,877
Prepayments and other current assets 5,080 3,081
----------------------------------------------------------------------------------------------------------------------
Total current assets 104,769 55,827
--------------------------------------------------------------------------------------------------------------------
Property, plant and equipment:
Land 3,368 2,116
Buildings and improvements 25,284 11,395
Machinery and equipment 42,034 32,154
----------------------------------------------------------------------------------------------------------------------
70,686 45,665
Less accumulated depreciation 21,845 18,167
----------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 48,841 27,498
--------------------------------------------------------------------------------------------------------------------
Other assets, net of accumulated amortization:
Goodwill 124,381 23,243
Other 14,215 5,406
----------------------------------------------------------------------------------------------------------------------
Total other assets 138,596 28,649
--------------------------------------------------------------------------------------------------------------------
Total assets $292,206 $111,974
========================================================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 20,890 $ 10,106
Customer deposits 11,765 1,589
Accrued liabilities 22,872 6,769
Current maturities of long-term debt 2,443 1,607
----------------------------------------------------------------------------------------------------------------------
Total current liabilities 57,970 20,071
--------------------------------------------------------------------------------------------------------------------
Long-term obligations:
Long-term debt 162,063 17,208
Deferred income taxes -- 876
Minority interest in consolidated subsidiary 786 810
Other 2,086 1,063
----------------------------------------------------------------------------------------------------------------------
Total liabilities 222,905 40,028
--------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $.02 par value: authorized 20,000,000 shares; issued 9,915,117 198 198
Additional paid-in capital 47,376 47,376
Treasury stock, at cost (1,265,151 and 992,777 shares, respectively) (15,455) (13,557)
Cumulative translation adjustments (221) (19)
Retained earnings 37,403 37,948
----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 69,301 71,946
--------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $292,206 $111,974
========================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
20
<PAGE>
<PAGE>
Consolidated Statements of Stockholders' Equity
For the Years Ended October 30, 1999, October 31, 1998, and November 1, 1997
<TABLE>
<CAPTION>
Additional Cumulative Total
Common Paid-in Treasury Translation Retained Stockholders'
In thousands 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 -- -- -- -- 12,634 12,634
Translation adjustments -- -- -- (1,001) -- (1,001)
--------------------------------------------------------------------------------------------------------------------------
Comprehensive income 11,633
Cash dividends -- -- -- -- (1,348) (1,348)
Issuance of stock to Employee
Stock Purchase Plan -- 8 893 -- -- 901
Exercise of employee incentive
stock options -- -- 624 -- (314) 310
Tax benefit of stock options -- 103 -- -- -- 103
Amortization of restricted stock -- -- -- -- 27 27
Treasury stock purchases -- -- (7,202) -- -- (7,202)
Issuance of stock for acquisition -- 5 359 -- -- 364
- ----------------------------------------------------------------------------------------------------------------------------
Balance, November 1, 1997 $198 $47,376 $ (6,855) $ (727) $33,272 $73,264
============================================================================================================================
Net earnings -- -- -- -- 6,350 6,350
Translation adjustments -- -- -- 708 -- 708
--------------------------------------------------------------------------------------------------------------------------
Comprehensive income 7,058
Cash dividends -- -- -- -- (1,457) (1,457)
Issuance of stock to Employee
Stock Purchase Plan -- -- 31 -- -- 31
Exercise of employee incentive
stock options -- -- 323 -- (217) 106
Treasury stock purchases -- -- (7,473) -- -- (7,473)
Issuance of stock for acquisition -- -- 417 -- -- 417
- ----------------------------------------------------------------------------------------------------------------------------
Balance, October 31, 1998 $198 $47,376 $(13,557) $ (19) $37,948 $71,946
============================================================================================================================
Net earnings -- -- -- -- 584 584
Translation adjustments -- -- -- (202) -- (202)
--------------------------------------------------------------------------------------------------------------------------
Comprehensive income 382
Cash dividends -- -- -- -- (710) (710)
Issuance of stock to Employee
Stock Purchase Plan -- -- 574 -- (226) 348
Exercise of employee incentive
stock options -- -- 177 -- (77) 100
Treasury stock purchases -- -- (3,017) -- -- (3,017)
Issuance of stock for acquisition -- -- 368 -- (116) 252
- ----------------------------------------------------------------------------------------------------------------------------
Balance, October 30, 1999 $198 $47,376 $(15,455) $ (221) $37,403 $69,301
============================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
21
<PAGE>
<PAGE>
Consolidated Statement of Cash Flows
For the Years Ended October 30, 1999, October 31, 1998, and November 1, 1997
<TABLE>
<CAPTION>
In thousands 1999 1998 1997
===========================================================================================================================
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 584 $ 6,350 $12,634
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization 6,004 3,753 4,230
Special and nonrecurring items 14,000 3,681 3,700
Translation adjustments during year (202) 708 (1,001)
Deferred income tax provision (5,852) 1,768 (978)
Minority interest in consolidated subsidiary (24) (64) (47)
Gain on sale of discontinued operations -- -- (6,770)
Earnings from discontinued operations -- -- (938)
Tax benefit of stock option exercises -- -- 103
Compensation expense under stock and option plans -- -- 27
Change in assets and liabilities:
Accounts receivable, net (7,595) (595) (3,346)
Inventories 1,239 (4,695) (4,655)
Prepayments and other current assets (106) 587 (438)
Other assets, net (1,893) (2,823) (1,087)
Accounts payable and customer deposits 2,516 (1,845) 3,264
Accrued liabilities (3,110) (6,375) (1,337)
Other liabilities (605) (156) --
---------------------------------------------------------------------------------------------------------------------
Cash provided by continuing operations 4,956 294 3,361
Cash provided by (used in) discontinued operations -- -- (99)
---------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities 4,956 294 3,262
=====================================================================================================================
Cash flows from investing activities:
Additions to property, plant and equipment, net (6,245) (6,594) (3,807)
Cost of businesses acquired (including working capital at
acquisition of $9,596 in 1999 and $564 in 1998) (137,101) (15,962) --
Net proceeds from sale of building -- 5,170 --
Proceeds from sale of discontinued operations -- -- 17,711
-------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) investing activities (143,346) (17,386) 13,904
=====================================================================================================================
Cash flows from financing activities:
Common stock issuances 700 137 1,575
Treasury stock purchases (3,017) (7,473) (7,202)
Cash dividends (710) (1,457) (1,348)
Additions to long-term debt, net 145,691 14,777 389
Debt issuance costs (6,582) -- --
-------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities 136,082 5,984 (6,586)
=====================================================================================================================
Increase (decrease) in cash and cash equivalents (2,308) (11,108) 10,580
Cash and cash equivalents - beginning of period 5,186 16,294 5,714
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - end of period $ 2,878 $ 5,186 $16,294
===========================================================================================================================
Supplemental cash flow information:
Cash paid for interest $ 2,824 $ 728 $ 91
=========================================================================================================================
Cash paid for taxes $ 6,834 $ 5,329 $ 4,841
=========================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
22
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements
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 balances and transactions are eliminated in
consolidation.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to October 31.
Fiscal years 1999, 1998 and 1997 ended October 30, 1999, October 31,
1998 and November 1, 1997, respectively, and included 52 weeks.
References to years relate to fiscal years rather than calendar years.
Nature of Business
The Company designs, manufactures and markets an extensive line of
furniture and related products for the food service, office,
hospitality, healthcare and retail markets, including table bases, table
tops, metal and wood chairs, booths and interior decor systems. 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, architecture
and design firms, office furniture dealers and end-users, through a
combination of its own direct factory sales force and independent
manufacturer's representatives. The Company considers its operations a
single industry segment.
The Company operates factories in Mexico through wholly owned
subsidiaries which produce all of its table base casting requirements
and also certain of its wood chair frames. Substantially all of the
sales of these subsidiaries are to the parent company and are eliminated
in consolidation. The Company has a manufacturing facility in the Czech
Republic, Falcon Mimon, a.s., which manufactures and sells chair frames
and fully finished wood chairs throughout Europe and in North America.
The Company operates Howe Europe a/s, located in Middelfart, Denmark,
which markets, assembles and distributes tables and chairs to the
European contract/office market. In addition, the Falcon Products
(Shenzen) Limited facility located in The People's Republic of China
manufactures and markets products primarily for the national accounts
market within the Asia Pacific region. Sales from foreign operations and
export sales from domestic facilities were $24.0 million, $13.6 million
and $9.3 million in 1999, 1998 and 1997, 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.
Substantially all of the Company's cash equivalents are denominated in
U.S. dollars and therefore the effect of exchange rate changes on cash
balances was not significant during any of the years presented.
Inventories
Inventories include material, labor and factory overhead and are stated
at the lower of cost or market. The cost of approximately 50% and 0% of
the inventories at October 30, 1999, and October 31, 1998, respectively,
has been determined using the Last-in, First-Out (LIFO) method. The
remaining inventories are valued using the First-In, First-Out (FIFO)
method. At October 30, 1999, the inventory valued using LIFO
approximates FIFO.
Inventories at October 30, 1999, and October 31, 1998, consist of
the following:
<TABLE>
<CAPTION>
In thousands 1999 1998
===================================================================================================
<S> <C> <C>
Raw materials $28,840 $18,174
Work in process 11,570 5,288
Finished goods 8,668 1,415
- ---------------------------------------------------------------------------------------------------
$49,078 $24,877
===================================================================================================
</TABLE>
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.
<PAGE>
Long-Lived Assets
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," requires that long-lived assets and certain identifiable
intangibles to be held and used or disposed of by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that
the carrying
23
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements
amount of assets may not be recoverable. The Company periodically
assesses the carrying value of long-lived assets, including intangible
assets, and recognizes impairment losses if it is determined the
carrying values are not recoverable.
Other Assets
Other assets consist of the following at October 30, 1999, and October
31, 1998:
<TABLE>
<CAPTION>
In thousands 1999 1998
===================================================================================================
<S> <C> <C>
Goodwill, net of accumulated
amortization of $3,872 and $2,285 $124,381 $23,243
Deferred debt issuance costs,
net of accumulated amortization
of $308 and $25 6,318 19
Deferred catalog costs, net of
accumulated amortization of
$17 and $965 697 2,241
Deferred tax asset 2,593 --
Other, net of accumulated
amortization of $977 and $1,102 4,607 3,146
- ---------------------------------------------------------------------------------------------------
$138,596 $28,649
===================================================================================================
</TABLE>
Goodwill represents the excess of cost over fair value of net
assets acquired at the date of acquisition. Goodwill is amortized on a
straight-line basis over 30 to 40 years. Deferred debt issuance costs
are amortized on a straight-line basis over the original life of the
respective debt issue, approximately six to 10 years. The cost of the
design, production and distribution of sales catalogs and reprints
thereof is being amortized on a straight-line basis over three to five
years.
Pension Plan
The Company has five noncontributory, defined benefit pension plans
covering certain hourly and substantially all domestic 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.
Foreign Currency Translation
The financial statements of the Company's non-U.S. subsidiaries are
translated into U.S. dollars in accordance with SFAS No. 52, "Foreign
Currency Translation." The functional currency for Falcon Mimon, a.s.
and Howe Europe a/s 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.
For the Company's Mexican subsidiaries, the functional currency
has been determined to be the U.S. dollar. The gain or loss resulting
from the translation of these financial statements is included in
selling, general and administrative expenses.
The net foreign currency translation and transaction gains
(losses) included in earnings for 1999, 1998 and 1997, were $267, ($737)
and ($304) thousand, respectively.
Interest Rate Hedge Agreement
The Company manages fluctuations in interest rates on borrowings under
its credit facility by using an interest rate swap agreement. The
interest rate swap agreement is accounted for as a hedge of a debt
obligation, and accordingly, the net settlement amount is recorded as an
adjustment to interest expense in the period incurred.
The Company's interest rate swap agreement provides an effective
ceiling and floor for its floating interest rate and outside this
interest rate range requires the Company to pay a fixed rate and receive
a floating rate thereby creating fixed rate debt. The Company's
participation in interest rate hedging transactions involves instruments
that have a close correlation with its debt, thereby managing risk. The
interest rate swap agreement has been designed for hedging purposes and
is not held or issued for speculative purposes.
Earnings Per Share
Earnings per share amounts have been calculated in accordance with SFAS
No. 128 using the weighted average number of shares outstanding during
each period, adjusted for the impact of common stock equivalents using
the treasury stock method when the effect is dilutive.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those reported.
<PAGE>
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 Statement of
Consolidated Stockholders' Equity. Comprehensive Income represents the
change in stockholders' equity during the period from transactions and
other events and circumstances from nonowner sources. It includes all
changes in equity except those resulting from investments by owners and
distributions to owners.
24
<PAGE>
<PAGE>
Note 2 - Business Acquisitions
In June 1999, the Company acquired all of the common stock of Shelby
Williams Industries, Inc. and its subsidiaries ("Shelby Williams") for a
cash price of $137.1 million. Shelby Williams is a leading manufacturer
of contract seating for the commercial contract furniture market. The
Company used the purchase method of accounting to record this
acquisition. Accordingly, results of operations have been included in
the financial statements from the date of acquisition. The purchase
price was allocated to the assets and liabilities (on a preliminary
basis) based on estimated fair values at the date of acquisition. This
resulted in an excess of purchase price over assets acquired of $99.2
million, which is being amortized on a straight-line basis over 40
years.
In March 1998, the Company acquired the stock of Howe Furniture
Corporation and its subsidiaries ("Howe") for $16.6 million, and assumed
$2.2 million of outstanding long-term debt of Howe. Howe specializes in
the design, engineering and marketing of tables for the contract office
and hospitality markets. The Company used the purchase method of
accounting to record this acquisition. Accordingly, results of
operations have been included in the financial statements from the date
of acquisition. The excess of the purchase price over amounts assigned
to net tangible assets ($13.9 million) was recorded as goodwill.
Following are the Company's unaudited pro forma results, excluding
special and nonrecurring items, assuming the acquisitions occurred on
November 2, 1997:
<TABLE>
<CAPTION>
In thousands, except per-share amounts 1999 1998
===================================================================================================
<S> <C> <C>
Net sales $325,814 $307,939
Net earnings 7,356 5,943
Basic and diluted earnings per share 0.83 0.64
===================================================================================================
</TABLE>
These unaudited pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of
operations that actually would have resulted had the combinations been
in effect on November 2, 1997, or of future results of operations.
Note 3 - Special and Nonrecurring Items
In conjunction with the acquisition of Shelby Williams, the Company
recorded a pre-tax integration charge of $14.0 million, $8.7 million
after taxes or $0.97 per share, to cover the anticipated costs of
combining its existing business with the acquired business. The charge
relates to the closing of certain duplicative manufacturing facilities.
Included in this charge is $3.5 million to write down the carrying
value of inventory, which is included in Cost of Sales, while the
remaining components are reported in Special and Nonrecurring Items in
the accompanying Consolidated Statements of Earnings. This one-time
charge includes costs associated with asset write-downs, asset
dispositions and other related costs associated with closing the excess
manufacturing facilities of $11.6 million, real estate exit costs of
$1.0 million and severance costs related to the elimination of
approximately 500 positions of $1.4 million. During 1999, the Company
utilized $12.4 million of the charge. At October 30, 1999, the remaining
amount of $1.6 million relates to severance and real estate exit costs
for which payment is anticipated during fiscal year 2000.
During 1998, the Company recorded a pre-tax charge of $4.7
million, $2.9 million after-tax or $0.32 per share, related to
management's decision to discontinue and dispose of the Company's hotel
casegoods line of business. The charge was substantially all utilized in
1998 and entailed the writedown of assets, including goodwill,
inventories and equipment associated with the product line located in
the Tijuana, Mexico, facility. Of the total charge, Cost of Sales
includes a $3.3 million charge to write down the carrying value of
inventory. The remaining components of the charge have been reported in
Special and Nonrecurring Items in the Consolidated Statements of
Earnings and are related to impairment charges and reserves for losses
on disposal of certain assets and exit costs for lease termination.
In 1998, the Company also recorded a $1.3 million pre-tax gain,
$0.8 million after-tax or $0.09 per share, on the sale of the Company's
corporate headquarters building during 1998, which is included in
Special and Nonrecurring Items in the accompanying Consolidated
Statements of Earnings. The Company entered into a two-year lease
agreement to lease back a portion of the premises, and accordingly, the
portion of the total $2.5 million gain representing the present value of
the operating lease payments, approximately $1.2 million, was deferred
and is included in other liabilities in the accompanying Consolidated
Balance Sheets. The deferred gain will be credited to income as a
reduction to rent expenses over the term of the lease.
During the fourth quarter of 1998, the Company recorded an
additional pre-tax charge of $0.2 million, $0.1 million after-tax or
$0.01 per share, related to the consolidation of the Company's
manufacturing facilities that was announced in 1997.
<PAGE>
During 1997, the Company recorded a pre-tax charge of $3.7
million, $2.3 million after-tax or $0.23 per share, for special and
nonrecurring items. The charges are a result of the consolidation of the
Company's manufacturing operations at its Anaheim, California, and
Belding, Michigan, facilities into its City of Industry, California,
facility and the elimination of several duplicative and nonperforming
wood seating product lines. These pre-tax
25
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements
charges have been reported in Special and Nonrecurring Items in the
Consolidated Statements of Earnings and included $3.0 million for costs
associated with asset write-downs and dispositions and $0.7 million for
exit costs of leased facilities and employee severance and termination
costs. All items were paid or utilized by the end of 1998.
Note 4 - 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 $17.7 million. The Hodges Division manufactures wire
shelving and kitchen equipment. The sale resulted in a gain of
approximately $6.8 million, net of applicable income taxes of $3.8
million.
The results of the Hodges Division for 1997 through the date of
the sale (approximately 10.5 months) are classified as discontinued
operations in the accompanying Consolidated Financial Statements.
Earnings from the discontinued Hodges Division in 1997 were $938,000,
net of applicable income taxes of $575,000. Net revenues from the Hodges
Division in 1997 through the date of the sale were $7.8 million.
Note 5 - Rental Expense and Lease Commitments
The Company leases certain manufacturing facilities and certain office
and transportation equipment under noncancelable lease agreements having
an initial term of more than one year and expiring at various dates
through the year 2006.
The future minimum rental commitments due under lease agreements
are as follows at October 30, 1999:
<TABLE>
<CAPTION>
Capital Operating
In thousands Leases Leases
===================================================================================================
<S> <C> <C>
2000 $ 61 $ 3,148
2001 61 2,681
2002 61 2,065
2003 61 1,841
2004 61 1,552
Later years -- 8,143
- ---------------------------------------------------------------------------------------------------
Total minimum lease payments $305 $19,430
===================================================================================================
Less amount representing interest (33)
- ------------------------------------------------------------------------------
Present value of minimum lease payments $272
==============================================================================
</TABLE>
Total operating lease and rental expense was approximately
$2,432,000, $1,622,000 and $1,463,000 in 1999, 1998 and 1997,
respectively.
Note 6 - Long-Term Debt
Long-term debt consists of the following at October 30, 1999, and
October 31, 1998:
<TABLE>
<CAPTION>
In thousands 1999 1998
===================================================================================================
<S> <C> <C>
Term loan expiring April 30, 2005,
LIBOR + 2.5% $ 60,000 $ --
11-3/8% senior subordinated notes,
due June 15, 2009 100,000 --
Revolving line of credit, interest at
prime minus 2.0% -- 16,935
Notes payable to a foreign bank,
secured by certain assets of
Falcon Mimon, due in varying
monthly installments, interest
at LIBOR + 2.5% 2,393 1,559
Notes payable to a foreign bank,
secured by certain assets of
Howe Europe, due in varying
quarterly installments, interest
at 4.5% to 5.1% 1,841 --
Obligations under capital leases,
due in annual installments through
November 16, 2003, interest at 4.0% 272 321
- ---------------------------------------------------------------------------------------------------
164,506 18,815
Less current maturities 2,443 1,607
- ---------------------------------------------------------------------------------------------------
$162,063 $17,208
===================================================================================================
</TABLE>
<PAGE>
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 that provided for a six-year term loan
of $70.0 million (the "Term Loan") and a six-year revolving credit
facility of up to $50.0 million (the "Revolving Credit Facility"). At
October 30, 1999, the Company had outstanding indebtedness of $60.0
million under the Term Loan, and no amounts were outstanding under the
Revolving Credit Facility.
The loans outstanding under the Senior Secured Credit Facility
bear interest at the Company's option, at (1) the London Interbank
Offered Rate ("LIBOR") plus the applicable margin, or (2) the greater of
the Prime Rate and the rate which is 1% in excess of the rates on
overnight Federal Funds transactions as published by the Federal Reserve
Bank of New York (the "Base Rate"), plus the applicable margin. The
applicable margin will be determined based on total leverage ratio. For
the Revolving Credit Facility and the Term Loan, the applicable margin
will range from 1.75% to 2.50% for LIBOR borrowings and from 0.75% to
1.50% for Base Rate borrowings.
26
<PAGE>
<PAGE>
The Company's Term Loan matures in quarterly installments
beginning July 31, 2000, with $3.0 million due in 2000, $7.5 million in
2001, $10.5 million in 2002, $13.5 million in 2003, $16.5 million in
2004, and $9.0 million in 2005.
Concurrently with entering into the Senior Secured Credit
Facility, the Company issued $100.0 million of 11-3/8% Senior
Subordinated Notes Series A (the "Series A Notes") due June 15, 2009,
with interest payable semiannually commencing December 15, 1999. The
proceeds from the issuance were used in conjunction with the Senior
Secured Credit Facility to finance the Shelby Williams acquisition along
with the fees and expenses associated with the acquisition. At any time
prior to June 15, 2002, the Company may redeem up to 35% of the
aggregate principal amount at a redemption price of 111.375% of the
principal amount, with the net cash proceeds from public equity
offerings.
Under the terms of the Senior Secured Credit Facility and the
indentures pursuant to which the Series A Notes have been issued (the
"Indenture"), the Company must comply with certain covenants including
limitations relating to the payment of dividends and the maintenance of
specific ratios.
Based on borrowing rates currently available for debt instruments
with similar terms and maturities, the fair market value of the
Company's long-term debt as of October 30, 1999, and October 31, 1998,
approximates the debt's carrying value.
At October 30, 1999, the Company had letters of credit outstanding
of approximately $25,000 relating to insurance reserves and certain
foreign purchases.
The Company has entered into an interest rate swap agreement with
a notional amount of $35 million. The notional amount of the interest
rate swap does not represent amounts exchanged by the parties and thus,
is not a measure of the Company's exposure through its use of the
interest rate swap agreement. The amounts exchanged are determined by
reference to the notional amount and other terms of the contract.
Management believes that the seller of the interest rate swap
agreement will be able to meet its obligation under the agreement. The
Company has policies regarding the financial stability and credit
standing of major counterparties. Nonperformance by the counterparty is
not anticipated nor would it have a material adverse effect on the
results of operations or financial position of the Company.
Note 7 - Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes" (SFAS No. 109), which 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.
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
In thousands 1999 1998 1997
===========================================================================================================================
<S> <C> <C> <C>
Current:
Federal $ 1,755 $1,551 $3,587
State 255 207 410
Foreign 304 175 --
Deferred (1,441) 1,768 (978)
- ---------------------------------------------------------------------------------------------------------------------------
$ 873 $3,701 $3,019
===========================================================================================================================
</TABLE>
The following is a reconciliation between statutory federal income tax
expense and actual income tax expense:
<TABLE>
<CAPTION>
In thousands 1999 1998 1997
===========================================================================================================================
<S> <C> <C> <C>
Computed "expected"
federal income
tax expense $ 494 $3,417 $2,701
Increase (decrease)
resulting from:
State income taxes 58 393 378
Nondeductible
goodwill amortization 532 164 30
Other, net (211) (273) (90)
- ---------------------------------------------------------------------------------------------------------------------------
$ 873 $3,701 $3,019
===========================================================================================================================
</TABLE>
<PAGE>
The significant components of deferred income tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
In thousands 1999 1998
===================================================================================================
<S> <C> <C>
Deferred tax assets:
Inventories $ 1,199 $ 434
Reserves and accruals 7,352 949
Net operating loss carryforward 675 822
- ---------------------------------------------------------------------------------------------------
9,226 2,205
- ---------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation and other property
basis differences (1,718) (1,153)
Other (2,320) (158)
- ---------------------------------------------------------------------------------------------------
(4,038) (1,311)
- ---------------------------------------------------------------------------------------------------
Net deferred income tax asset $ 5,188 $ 894
===================================================================================================
</TABLE>
Net current deferred income tax assets are included in prepayments
and other current assets in the accompanying Consolidated Balance
Sheets. The Company's net operating loss carryforward expires in 2013.
The Company's income tax returns have been examined by the Internal
Revenue Service for fiscal years through 1994.
27
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements
Note 8 - Stock Option and Stock Purchase Plans
The Company has an employee incentive stock option plan which allows the
Company to grant key employees incentive and nonqualified stock options
to purchase 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 10 years from the date of grant.
The Company also has a Non-Employee Director Stock Option Plan,
approved by the stockholders, under which the Company annually grants an
option to purchase 2,000 shares of common stock to each director who is
neither an officer of the Company nor compensated under any employment
or consulting arrangements ("Non-Employee Director"). Under the plan,
the option exercise price is the fair market value of the Company's
common stock on the date of the grant and the options are exercisable,
on a cumulative basis, at 20% per year commencing on the date of the
grant.
The Non-Employee Director Stock Option Plan was amended in
December 1998 to increase the number of shares underlying the options
granted from 1,650 to 2,000.
The Company accounts for the option plans using APB Opinion No.
25, "Accounting for Stock Issued to Employees." Accordingly, no
compensation expense has been recognized relating to the stock options.
Stock option transactions under the plans for 1999, 1998, and 1997 are
summarized below:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ---------------------- ----------------------
Average Number Average Number Average Number
Price Of Shares Price Of Shares Price Of Shares
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of year $11.66 870,848 $10.70 687,892 $ 9.35 575,925
Options granted $10.52 567,000 $14.07 242,550 $14.49 168,900
Options canceled $12.45 135,839 $13.55 37,791 $13.16 12,754
Options exercised $ 8.03 12,039 $ 4.88 21,803 $ 7.01 44,179
- ---------------------------------------------------------------------------------------------------------------------------
Options outstanding at end of year $11.09 1,289,970 $11.66 870,848 $10.70 687,892
- ---------------------------------------------------------------------------------------------------------------------------
Exercisable at end of year 530,340 447,663 311,847
===========================================================================================================================
</TABLE>
Stock options outstanding at October 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------- ----------------------------
Number Remaining Weighted Average Number Weighted Average
Range of Exercise of Options Contractual Life Exercise Price of Options Exercise Price
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
$ 0.60 - $9.77 541,420 5.9 $ 9.00 329,090 $ 9.07
$10.00 - $12.88 430,200 8.1 $11.38 93,670 $10.81
$13.13 - $15.00 318,350 7.7 $14.26 107,580 $14.27
- ---------------------------------------------------------------------------------------------------------------------------
1,289,970 7.1 $11.09 530,340 $10.44
===========================================================================================================================
</TABLE>
Pro forma net earnings and net earnings per common share in the
following table were prepared as if the Company had accounted for its
stock option plans under the fair market value method of SFAS No. 123,
"Accounting for Stock-Based Compensation."
<TABLE>
<CAPTION>
1999 1998 1997
==============================================================================
<S> <C> <C> <C>
Net earnings-pro forma
(in thousands) $55 $6,127 $12,446
Net earnings per share-
pro forma $0.01 $0.66 $1.26
Weighted average fair value
of options granted $3.07 $6.64 $7.39
==============================================================================
</TABLE>
For the pro forma disclosures, the fair value of each option grant
is estimated at the date of the grant using an option pricing model with
the following assumptions:
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
==============================================================================
<S> <C> <C> <C>
Expected dividend yield 1% 1% .7%
Expected stock price volatility 30% 30% 30%
Risk-free interest rate 5.2% 5.8% 6.4%
Expected life of option 6.2 years 10 years 10 years
==============================================================================
</TABLE>
In 1998, the Company adopted an Employee Stock Purchase Plan.
Under the Employee Stock Purchase Plan, employees may contribute up to
10% of their gross income to purchase stock of the Company at 85% of the
lesser of the fair market value on the grant date or the exercise date.
28
<PAGE>
<PAGE>
During 1997, the Company had a Stock Purchase Plan under which
eligible employees could elect to invest up to 10% of salary earned
during each pay period and the Company contributed an amount equal to
40% of each participant's contributions. This plan was terminated at the
end of fiscal 1997.
Note 9 - Earnings Per Share
In accordance with SFAS No. 128, the following table reconciles net
earnings and weighted average shares outstanding to the amounts used to
calculate basic and diluted earnings per share for each of the years
ended 1999, 1998 and 1997.
<TABLE>
<CAPTION>
In thousands,
except per-share data 1999 1998 1997
==============================================================================
<S> <C> <C> <C>
Net earnings $584 $6,350 $4,926
==============================================================================
Average shares outstanding 8,825 9,156 9,665
Assumed exercise of
options (treasury method) 53 126 211
- ------------------------------------------------------------------------------
Average shares outstanding
adjusted for
dilutive effects 8,878 9,282 9,876
==============================================================================
Basic earnings per share $0.07 $0.69 $0.51
==============================================================================
Diluted earnings per share $0.07 $0.68 $0.50
==============================================================================
</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 year. Diluted earnings available to
common stockholders was determined assuming the options issued and
outstanding were exercised as of the first day of the respective year of
the grant date. Options to purchase 748,550 shares at a weighted average
exercise price of $12.61 per share, 386,850 shares at a weighted average
exercise price of $14.23 per share and 155,400 shares at a weighted
average exercise price of $14.51 were outstanding during 1999, 1998 and
1997, respectively, but were not included in the computation of diluted
earnings per share because the exercise price was greater than the
average market price of the common stock.
Note 10 - Pension Plans
The Company has five noncontributory, defined benefit pension plans
covering certain hourly and substantially all salaried domestic
personnel. For the Company's plans, normal retirement age is 65, but
provision is made for earlier retirement. Benefits are based on 1.5% of
average annual compensation for each year of service. Full vesting
occurs upon completion of five years of service. Assets of the Company's
pension plans primarily consist of investments in publicly traded
securities and in group annuity contracts with insurance companies.
The following actuarial assumptions were used in determining the
Company's net periodic pension cost and projected benefit obligation:
<TABLE>
<CAPTION>
1999 1998
============================================================================================
<S> <C> <C>
Discount rate 7.50% 7.25%
Rate of salary increase 5.00% 5.00%
Expected long-term rate
of return on plan assets 9.00% 9.00%
============================================================================================
</TABLE>
<PAGE>
Net periodic pension cost of the plan is as follows:
<TABLE>
<CAPTION>
In thousands 1999 1998
=============================================================================================
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 6,621 $ 6,780
Service cost 718 619
Interest cost 458 522
Actuarial (gain) loss (642) 619
Acquisition 24,518 0
Benefits paid (683) (1,919)
- ---------------------------------------------------------------------------------------------
Benefit obligation at end of year $30,990 $ 6,621
=============================================================================================
Change in plan assets
Fair value of plan assets at beginning of year $ 5,856 $ 6,289
Actual return on plan assets 392 540
Acquisition 23,312 0
Employer contributions 1,408 946
Benefits paid (683) (1,919)
- ---------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $30,285 $ 5,856
=============================================================================================
Reconciliation of funded status
Funded status (underfunded)/overfunded $ (705) $ (765)
Unrecognized net actuarial (gain)/loss 361 676
Unrecognized transition (asset)/obligation (8) (49)
Unrecognized prior service cost 441 513
- ---------------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost $ 89 $ 375
=============================================================================================
Components of net periodic benefit cost
Service cost $ 718 $ 619
Interest cost 458 427
Expected return on plan assets (492) (495)
Amortization of plan assets 16 0
Amortization of prior service cost 72 72
Amortization of transition (asset)/obligation (41) (40)
Recognized net actuarial loss/(gain) (11) 0
- ---------------------------------------------------------------------------------------------
Net periodic benefit cost $ 720 $ 583
=============================================================================================
</TABLE>
Note 11 - Business Segment Information
The Company operates in one product business segment, the manufacturing
and sale of commercial contract furniture. Additionally, the Company's
operations are located worldwide and are analyzed on a consolidated
basis.
29
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements
Note 12 - Transactions with Related Parties
Certain of the Company's directors or their affiliates provide various
consulting and other professional services to the Company or purchase
some of the Company's products. During 1999, 1998 and 1997, the Company
incurred expenses of approximately $874,000, $222,000 and $99,000,
respectively, for such services.
Note 13 - Contingencies
The Company is subject to various lawsuits and claims with respect to
such matters as patents, product liabilities, government regulations,
and other actions arising in the normal course of business. In the
opinion of management, the ultimate liabilities resulting from such
lawsuits and claims will not have a material adverse effect on the
Company's financial condition and results of operations.
Note 14 - Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
In thousands, except per-share data
===========================================================================================================================
1999 First Second Third Fourth
===========================================================================================================================
<S> <C> <C> <C> <C>
Net sales $34,595 $36,469 $59,884 $91,547
Special and nonrecurring items -- -- 10,500 --
Gross margin 9,902 10,672 2,817 24,612
Net earnings (loss) 1,864 1,970 (6,229) 2,979
Earnings per share:
Diluted earnings (loss) per share $ 0.21 $ 0.23 $ (0.71) $ 0.34
===========================================================================================================================
<CAPTION>
===========================================================================================================================
1998 First Second Third Fourth
===========================================================================================================================
<S> <C> <C> <C> <C>
Net sales $28,060 $33,651 $41,297 $40,418
Special and nonrecurring items -- -- 111 160
Gross margin 8,134 9,525 9,113 13,316
Net earnings 1,782 1,838 216 2,514
Earnings per share:
Diluted earnings (loss) per share $ 0.19 $ 0.20 $ 0.02 $ 0.28
===========================================================================================================================
</TABLE>
30
<PAGE>
<PAGE>
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
30, 1999, and October 31, 1998, and the related consolidated statements
of earnings, stockholders' equity and cash flows for each of the three
fiscal years in the period ended October 30, 1999. These financial
statements 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 30, 1999, and October 31,
1998, and the results of their operations and their cash flows for each
of the three fiscal years in the period ended October 30, 1999, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
St. Louis, Missouri
December 15, 1999
31
<PAGE>
<PAGE>
Selected Financial Data
<TABLE>
<CAPTION>
In thousands, except per-share amounts 1999 1998 1997 1996 1995 1994
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Net sales $222,495 $143,426 $113,010 $100,702 $79,647 $67,957
Cost of sales, including nonrecurring items 163,992 103,067 79,507 69,125 52,883 45,318
Special and nonrecurring items 10,500 271 3,700 -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Gross margin 48,003 40,088 29,803 31,577 26,764 22,639
Selling, general and administrative expenses 39,289 29,482 22,044 20,469 16,992 14,354
- ------------------------------------------------------------------------------------------------------------------------
Operating profit 8,714 10,606 7,759 11,108 9,772 8,285
Interest expense (income), net 7,281 619 (139) (95) (141) (145)
Minority interest 24 64 47 89 (44) 4
- ------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations
before income taxes 1,457 10,051 7,945 11,292 9,869 8,434
Income tax expense 873 3,701 3,019 4,291 3,693 3,121
- ------------------------------------------------------------------------------------------------------------------------
Net earnings from continuing operations 584 6,350 4,926 7,001 6,176 5,313
Discontinued operations, net of tax -- -- 938 1,432 1,281 864
Gain on sale of discontinued operations, net of tax -- -- 6,770 -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Net earnings $ 584 $ 6,350 $ 12,634 $ 8,433 $ 7,457 $ 6,177
========================================================================================================================
Earnings per share - Diluted:<F1>
Continuing operations $ 0.07 $ 0.68 $ 0.50 $ 0.71 $ 0.64 $ 0.55
Discontinued operations -- -- 0.09 0.15 0.13 0.09
Gain on sale of discontinued operations -- -- 0.69 -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Net earnings per share $ 0.07 $ 0.68 $ 1.28 $ 0.86 $ 0.77 $ 0.64
========================================================================================================================
Cash dividends per share $ 0.08 $ 0.16 $ 0.14 $ 0.10 $ 0.07 $ 0.04
========================================================================================================================
Financial Position:
Working capital $ 46,799 $ 35,756 $ 38,691 $ 34,531 $29,927 $25,658
Property, plant and equipment, net 48,841 27,498 25,211 24,485 21,529 18,467
Capital expenditures 6,245 6,594 3,807 4,449 4,969 4,608
Total assets 292,206 111,974 99,357 84,388 74,884 64,905
Total debt 164,506 18,815 1,794 1,405 1,889 1,787
Stockholders' equity 69,301 71,946 73,264 68,476 58,307 50,556
========================================================================================================================
<FN>
<F1>Per-share data reflects adjustments related to the December 1995,
10% stock dividend.
</TABLE>
32
<PAGE>
<PAGE>
Board of Directors
Franklin A. Jacobs <F*>
Chairman of the Board and
Chief Executive Officer
Falcon Products, Inc.
Raynor E. Baldwin <F+>
President
Woodsmiths, Inc.
Melvin F. Brown <F+>
Chairman Emeritus
Deutsche Financial Services
Donald P. Gallop <F*>
Chairman
Gallop, Johnson & Neuman, L.C.
Attorneys At Law
James L. Hoagland
Retired, Past President and
Chief Executive Officer
Graybar Electric Company, Inc.
S. Lee Kling <F*>
Chairman of the Board
Kling Rechter & Co., Inc.
Lee M. Liberman <F+>
Retired, Past Chairman of
the Board
Laclede Gas Company
Darryl C. Rosser
President and
Chief Operating Officer
Falcon Products, Inc.
James Schneider
Broker
International Monetary Market
Chicago Mercantile Exchange
[FN]
<F*> Member Executive Committee
<F+> Member Audit Committee
Form 10-K
A copy of the Annual Report to the Securities and Exchange Commission on
Form 10-K may be obtained from the Company at no charge.
Direct your requests to:
Corporate Secretary
Falcon Products, Inc.
9387 Dielman Industrial Drive
St. Louis, Missouri 63132
Trading Information
Falcon Products, Inc., common stock is traded on the New York Stock
Exchange, Symbol: FCP
Corporate Officers
Franklin A. Jacobs
Chairman of the Board and
Chief Executive Officer
Darryl C. Rosser
President and
Chief Operating Officer
R. Scott Boyd
Vice President, Hospitality
Stephen E. Cohen
Vice President, Sales and Marketing
John K. Cronin
Vice President, Contract
Robert P. Coulter
President and
Chief Operating Officer,
Shelby Williams Industries, Inc.
Michael J. Dreller
Vice President, Finance and Chief Financial Officer
Lynda Garrison
Vice President, Support Services and Systems Development
Richard Hnatek
Senior Vice President, Quality
<PAGE>
Michael Jacobs
Vice President, International
Michael J. Kula
Vice President, Corporate Technology and Development
Michael Moore
Vice President Sales,
Shelby Williams Industries, Inc.
Charles A. Pineau
Vice President, Human Resources
Jackson H. Spidell
Vice President, Operations
Annual Meeting
The Annual Meeting of Stockholders will be held Thursday, March 16,
2000, at 4:00 p.m. at the St. Louis Club, 16th Floor, 7701 Forsyth Blvd.
Clayton, Missouri 63105
Facilities
Corporate Headquarters
Falcon Products, Inc.
9387 Dielman Industrial Drive
St. Louis, Missouri 63132
www.falconproducts.com
Falcon de Juarez, S.A. de C.V.
APDO, Postal 2519 E.
CD Juarez, Chih., Mexico
U.S.A. - P.O. Box 12865
Falcon Mimon, a.s.
Hvezdovska 644
47124 Mimon
Czech Republic
Falcon Products
(Shenzhen) Limited
Pin Hu Cun, Pin Hu Zheng
Shenzhen
The People's Republic of China
518111
Howe Europe a/s
Fabriksvej 15c Roejle
5500 Middelfart, Denmark
Falcon/Belmont
22 Falcon Drive
Belmont, Mississippi 38827
Falcon/City of Industry
16040 Stephens Street
City of Industry, California 91745
Falcon/Newport
810 West Highway 25/70
Newport, Tennessee 37821
Shelby Williams/Morristown
150 Shelby Williams Drive
Morristown, Tennessee 37813
Industrial Mueblera Shelby Williams, S.A. DE C.V.
Manzana IV, Lote 1, Parque Industrial Calera DE V.R. 98500
Calera, Zacatecas, Mexico
King Arthur
603 Meacham Road
Statesville, North Carolina 28677
Sellers & Josephson
86 Route 4 East
Englewood, New Jersey 07631
Sellers & Josephson
50 Amor Avenue
Carlstadt, New Jersey 07072
Thonet
2075 Highway 43
Canton, Mississippi 39046
Chicago Showrooms
11-111 and
1169 Merchandise Mart
Chicago, Illinois 60654
California Showroom
8687 Melrose Avenue
Los Angeles, California 90069
<PAGE>
Atlanta Showroom
#5 Piedmont Center
3525 Piedmont Road North East
Suite #100
Atlanta, Georgia 30305
Dallas Showroom
1444 Oak Lawn Avenue
Suite 612
Dallas, Texas 75207
Florida Showroom
8211 West Brownard Boulevard
Suite 120
Plantation, Florida 33324
Houston Sales Office
7026 Old Katy Road
Suite 267
Houston, Texas 77024
New York Sales Office
A&D Building Suite 300
150 East 58th Street
New York, New York 10005
Transfer Agent
Registrar & Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
800-368-5948
Independant
Public Accountants
Arthur Andersen LLP
1010 Market Street
St. Louis, Missouri 63101
Corporate Counsel
Gallop, Johnson & Neuman, L.C.
101 South Hanley Road
St. Louis, Missouri 63105
<PAGE>
EXHIBIT 21
----------
SUBSIDIARIES OF THE COMPANY
---------------------------
The following are the subsidiaries of the Company. All subsidiaries
are wholly-owned, directly or indirectly, by the Company, unless
otherwise noted.
Entity
Jurisdiction
Howe Furniture Corporation
New York
Johnson Industries, Inc.
Illinois
Howe Europe a/s
Denmark
Falcon Products (Shenzen) Limited
The Peoples' Republic of China
Falcon Holdings, Inc.
Missouri
Falcon Mimon a/s (87.4% ownership)
Czech Republic
Shelby Williams Industries, Inc.
Delaware
Sellers & Josephson, Inc.
New Jersey
Shelby FSC Corporation
U.S. Virgin Islands
Madison Furniture Industries, Inc.
Mississippi
Thonet International (UK) Limited
England
Industrial Mueblera Shelby Williams, S.A. de C.V.
Mexico
Falcon De Juarez, S.A. de C.V.
Mexico
Fundicianes Tecnicas, S.A.
Mexico
Falcon De Baja California, S.A. de C.V.
Mexico
<PAGE>
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, 33-46998, 33-58159, 333-18671, 333-60735, and
333-83207.
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
January 26, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
SEC Form 10-K for the period ended October 30, 1999 and is qualified
in its entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-30-1999
<PERIOD-END> OCT-30-1999
<CASH> 2,878
<SECURITIES> 0
<RECEIVABLES> 47,733
<ALLOWANCES> 1,352
<INVENTORY> 49,078
<CURRENT-ASSETS> 104,769
<PP&E> 70,686
<DEPRECIATION> 21,845
<TOTAL-ASSETS> 292,206
<CURRENT-LIABILITIES> 57,970
<BONDS> 162,063
<COMMON> 198
0
0
<OTHER-SE> 69,103
<TOTAL-LIABILITY-AND-EQUITY> 292,206
<SALES> 222,495
<TOTAL-REVENUES> 222,495
<CGS> 163,992
<TOTAL-COSTS> 174,492
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,281
<INCOME-PRETAX> 1,457
<INCOME-TAX> 873
<INCOME-CONTINUING> 584
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 584
<EPS-BASIC> 0.07
<EPS-DILUTED> 0.07
</TABLE>
