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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 NOVEMBER 2, 2002
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
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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
------------------- -------------------
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|
The aggregate market value of the shares of Common Stock held by
nonaffiliates of the Registrant as of January 15, 2003 was $28.2 million based
upon the closing stock price as reported on the New York Stock Exchange on such
date.
As of January 15, 2003, the Registrant had 8,996,910 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the fiscal
year ended November 2, 2002 are incorporated herein by reference into Parts II
and IV of this Report.
Portions of the Registrant's Proxy Statement for the 2003 Annual Meeting of
Stockholders to be held March 6, 2003, are incorporated herein by reference
into Part III of this Report.
- 1 -
TABLE OF CONTENTS
PAGE
----
PART I
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ITEM 1. Business.................................... 3
ITEM 2. Properties.................................. 8
ITEM 3. Legal Proceedings........................... 8
ITEM 4. Submission of Matters to a Vote of Security
Holders..................................... 8
ITEM 4A. Executive Officers of the Registrant........ 9
PART II
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ITEM 5. Market for the Registrant's Common Equity
and Related Stockholder Matters............. 9
ITEM 6. Selected Financial Data..................... 10
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of 10
Operations..................................
ITEM 7A. Quantitative and Qualitative Disclosures
About Market Risk .......................... 10
ITEM 8. Financial Statements and Supplementary Data. 10
ITEM 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure.................................. 11
PART III
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ITEM 10. Directors and Executive Officers of the 11
Registrant..................................
ITEM 11. Executive and Director Compensation......... 11
ITEM 12. Security Ownership of Certain Beneficial
Owners and Management....................... 11
ITEM 13. Certain Relationships and Related 11
Transactions................................
ITEM 14. Controls and Procedures..................... 12
PART IV
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ITEM 15. Exhibits, Financial Statement Schedules and
Reports on Form 8-K......................... 12
SIGNATURES ............................................ 18
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CERTIFICATIONS ............................................ 19
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EXHIBIT INDEX ............................................ 21
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- 2 -
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, contract office,
hospitality, healthcare and education markets, including metal and wood
chairs, folding tables, table bases, table tops, 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.
The Company's executive office is located at 9387 Dielman Industrial
Drive, St. Louis, Missouri 63132. The Company was incorporated in the State
of Delaware in 1974, succeeding a business, which had commenced operations
in 1957.
PRODUCTS
The Company's principal products consist of an extensive line of
furniture and related products, including wood and metal chairs, banquet and
conference tables, table tops, table bases, booths, casegoods and other
related products.
The Company markets its seating products under the Falcon, Charlotte,
Decor Concepts, Epic, Howe, Johnson Tables, Shelby Williams, King Arthur 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 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.
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.
- 3 -
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, as well as a full range of vinyl wall coverings. The Company
markets these products under the Sellers & Josephson and King Arthur 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.
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.
- 4 -
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 seven showrooms throughout the United States;
- maintaining regular contact with key customers; and
- conducting ongoing surveys to determine customer satisfaction.
Alliance Program. The Company's office and other furniture products are
also marketed through the Company's Alliance Program, a network of over 400
independent office furniture dealers. Alliance Program 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 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 Alliance Program dealers.
International Sales. The Company's products are marketed throughout
Europe through distribution agreements with a number of European
distributors. The Company's Howe 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 Company's
Falcon Mimon, a.s., subsidiary located in Mimon, Czech Republic ("Falcon
Mimon") also markets wood chair frames directly. 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 People's Republic of China ("Falcon China") markets table
tops and millwork to support customers throughout the Asia Pacific region.
The Company's international sales efforts are supported by dedicated
customer service personnel. During 2002, 2001, and 2000, foreign operations
and export sales were $17.4, $22.4, and $25.0, million, respectively. Of
these amounts, $11.8 million, $9.3 million and $9.7 million of sales in
2002, 2001, and 2000, 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.
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.
- 5 -
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, 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 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, and Englewood and
Carlstadt, New Jersey, and internationally in Mimon, Czech Republic, Juarez
and Zacatecas, Mexico, Shenzhen, The People's Republic of China and
Middelfart, Denmark.
RAW MATERIALS
The Company manufactures 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.
BACKLOG
As of November 2, 2002, the Company's backlog of orders for its products
believed to be firm was approximately $44.8 million, as compared to $49.7
million at November 3, 2001. 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.
- 6 -
EMPLOYEES
As of November 2, 2002, the Company employed approximately 2,110 persons
in its six domestic manufacturing facilities and support locations, 260 in
its manufacturing facilities in Mexico, 80 in China, 40 in Denmark, and 350
in its manufacturing facility in Mimon, Czech Republic. Approximately 250
persons were employed in sales, 120 persons in administration and 2,470 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), "THONET"(R),
"PHILOCRAFT"(R), "EPIC"(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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ITEM 2. PROPERTIES.
The following table provides information with respect to each of the
Company's manufacturing facilities:
BUILDING AREA
LOCATION (SQUARE FEET) PRODUCTS LEASE/OWNERSHIP TERMS
- ------------------------------ ------------- ---------------------------- -------------------------------
Domestic
St. Louis, Missouri 60,000 Principal executive offices Leased, expiring in July
2015.
Morristown, Tennessee 744,000 Wood chairs, metal chairs, Owned.
upholstered seating and
rattan/wicker products
Canton, Mississippi 406,000 Wood chairs and upholstered Approximately 238,100 square
seating feet owned and 167,900 square
feet leased under certain
leases expiring from January
2009 through May 2010.
Newport, Tennessee 425,800 Table bases, table tops, Leased, expiring in June
millwork, casegoods, and 2012 with two five-year
booths renewal options.
Belmont, Mississippi 227,000 Metal chairs, banquet Own 176,000 square feet in
tables, and dance floors four contiguous buildings;
lease 51,000 square feet
expiring in November 2003.
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 October
2004.
Foreign
Mimon, Czech Republic 700,000 Wood chairs Owned.
Zacatecas, Mexico 90,000 Wood chairs Owned.
Juarez, Mexico 51,000 Iron castings for table Owned.
bases
Shenzhen, The People's 15,000 Table tops and millwork Leased, month-to-month.
Republic of China
Middelfart, Denmark 34,000 Tables and chairs Owned.
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.
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. With the exception of the litigation described in Item 1,
Business - Governmental Regulations and Environmental Matters, located on
page 7 of this report, there are no material pending legal proceedings,
other than routine litigation incidental to the business, to which the
Company is a party or of which any of the Company's property is the subject.
ITEM 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 November 2, 2002.
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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT*.
As of January 15, 2003, the Executive Officers of the Company are:
NAME POSITION AGE
- ------------------ ---------------------------------------------------------- ---
Franklin A. Jacobs Chairman of the Board and Chief Executive Officer since 70
1971; President from 1957 to May 1981 and again from
January 1984 to December 1995.
David L. Morley President and Chief Operating Officer since December 2000; 46
prior to joining the Company, Senior Vice President of
Monsanto Company from 1998 to 2000; President - Nutrition
and Consumer Products Company of Monsanto Company from
1997 to 1998.
Stephen E. Cohen Vice President - Sales and Marketing since August 1998; 34
Vice President - Sales from November 1996 to August 1998.
David K. Denner Vice President-Operations since January 2002; prior to 48
joining the Company, Plant Manager of Astaris from 2000
to 2001; Executive Vice President - Manufacturing
Operations of Angus Chemical Company from 1997 to 1999.
Michael J. Dreller Vice President-Finance and Chief Financial Officer, 40
Secretary and Treasurer since January 1996.
Michael J. Kula Vice President - Corporate Technology & Development 53
since November 1998; Vice President - Operations from
July 1996 to November 1998.
Each officer is elected annually by the Board of Directors.
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* 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.
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.
MARKET PRICE
------------------------ DIVIDENDS
HIGH LOW PER SHARE
-------- --------- ---------
Year ended November 2, 2002:
First Quarter $ 7.10 $ 5.29 $ _
Second Quarter 6.65 5.80 _
Third Quarter 6.50 4.00 _
Fourth Quarter 4.60 3.70 _
Year ended November 3, 2001:
First Quarter $ 8.25 $ 6.88 $ .04
Second Quarter 10.00 7.50 .04
Third Quarter 8.60 6.84 _
Fourth Quarter 7.50 4.90 _
The Company's Common Stock closing sales price on January 15, 2003 was
$4.27.
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.
- 9 -
(c) Approximate Number of Holders of Common Stock
The approximate number of holders of record of the Company's Common
Stock as of January 15, 2003 was 711.
(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.
EQUITY COMPENSATION PLAN - The following table sets forth information as
of November 2, 2002, with respect to compensation plans which equity
securities of the Registrant are authorized for issuance.
Number of securities to Weighted-average Number of securities remaining
be issued upon exercise exercise price of available for future issuance under
of outstanding options, outstanding options, equity compensation plans (excluding
warrants and rights warrants and rights securities reflected in column (A))
Plan Category (A) (B) (C)
------------- ----------------------- -------------------- ------------------------------------
Equity compensation plans
approved by security holders 1,981,389 $9.24 584,129
Equity compensation plans not
approved by security holders - - -
----------------------- -------------------- ------------------------------------
Total 1,981,389 $9.24 584,129
======================= ==================== ====================================
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data contained in the Registrant's Annual Report
for the fiscal year ended on November 2, 2002 (the "2002 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 2002
Annual Report is incorporated herein by reference and contained herein as
Exhibit 13.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information contained under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the 2002
Annual Report is incorporated herein by reference and contained herein as
Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements together with the notes thereto
and the report of independent public auditors (as set forth in Part IV, Item
14 (a) (1)) in the 2002 Annual Report are incorporated herein by reference.
The financial data contained under the caption "Quarterly Financial
Information" in the 2002 Annual Report is also incorporated herein by
reference and contained herein as Exhibit 13.
- 10 -
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On July 24, 2002, the Board of Directors of the Registrant, based on the
recommendation of its Audit Committee, dismissed Arthur Andersen LLP
("Andersen") as the Registrant's independent public accountants and engaged
Ernst & Young ("Ernst & Young") to serve as the Registrant's independent
public accountant for the fiscal year ended November 2, 2002. Andersen
audited the Registrant's financial statements for fiscal years 2001 and
2000, and had been the Registrant's independent public accountants since
1984.
Andersen's reports on the Registrant's consolidated financial statements
as of and for each of the fiscal years ended November 3, 2001, and October
28, 2000, did not contain an adverse opinion or disclaimer of opinion, nor
were they qualified or modified as to uncertainty, audit scope or accounting
principles.
During the fiscal years ended November 3, 2001, and October 28, 2000,
and during the subsequent interim periods preceding the engagement of Ernst
& Young, there were no disagreements with Andersen on any matter of
accounting principle or practice, financial statement disclosure, or
auditing scope or procedure which, if not resolved to Andersen's
satisfaction, would have caused it to make reference to the subject matter
in connection with its report on Falcon's consolidated financial statements
for such years; and there were no reportable events as defined in Item
304(a)(1)(v) of Regulation S-K.
The Registrant requested that Andersen furnish it with a letter
addressed to the Securities and Exchange Commission stating whether or not
it agrees with the statements made in the Form 8-K filed on July 24, 2002.
Andersen communicated to the Registrant that they informed the Securities
and Exchange Commission that they were unable to provide letters that
corroborate or invalidate the statements contained in the Form 8-K. As a
result, no such letter was filed with the Form 8-K.
During the fiscal years ended November 3, 2001, and October 28, 2000,
and the subsequent interim periods preceding the engagement of Ernst &
Young, the Registrant had not consulted with Ernst & Young regarding any
matter or events set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.
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 2003 Annual Meeting of
Stockholders to be held March 6, 2003 (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", "OPTION/SAR GRANTS IN LAST FISCAL YEAR",
"AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES", "PENSION PLAN TABLE" and "EMPLOYEMENT ARRANGEMENTS WITH EXECUTIVE
OFFICERS" 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.
- 11 -
ITEM 14. CONTROLS AND PROCEDURES.
The Registrant's chief executive officer and chief financial officer
have evaluated the effectiveness of the Registrant's disclosure controls and
procedures (as defined in Exchange Act Rules 13a -14(c) and 15d-14(c)) as of
a date within 90 days prior to the filing date of this annual report on Form
10-K (the "Evaluation Date"). Based on such evaluation, each such officer
has concluded that, as of the Evaluation Date, the Registrant's disclosure
controls and procedures are effective in alerting them on a timely basis to
material information relating to the Registrant required to be included in
the Registrant's reports filed or submitted under the Exchange Act.
Since the Evaluation Date, there have not been any significant changes
in the Registrant's internal controls, or in other factors that could
significantly affect such controls.
PART IV
ITEM 15. 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 2002 Annual Report are incorporated by reference in Part II, Item 8:
ANNUAL REPORT
PAGE REFERENCE
--------------
Consolidated Statements of Earnings for the years ended November 2, 2002,
November 3, 2001, October 28, 2000. 18
Consolidated Balance Sheets as of November 2, 2002, and November 3, 2001. 19
Consolidated Statements of Stockholders' Equity for the years ended
November 2, 2002, November 3, 2001, and October 28, 2000. 20
Consolidated Statements of Cash Flows for the years ended November 2, 2002,
November 3, 2001, and October 28, 2000. 21
Notes to Consolidated Financial Statements 22
Report of Independent Auditors 30
(a) 2. Financial Statement Schedules
Report of Independent Auditors
The following financial statement schedules are included in Item 15
on pages 14-17 of this Report:
Schedule I-Guarantor and non-guarantor financial statements for the
years ended November 2, 2002, November 3, 2001, and October 28,
2000.
Schedule II-Valuation and Qualifying Accounts for the years November
2, 2002, November 3, 2001, and October 28, 2000.
(a) 3. Exhibits:
See Exhibit Index on pages 21 through 22 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 November 2, 2002.
- 12 -
REPORT OF INDEPENDENT AUDITORS
------------------------------
TO BOARD OF DIRECTORS FALCON PRODUCTS, INC.
We have audited the consolidated financial statements of Falcon Products,
Inc. as of November 2, 2002, and for the year then ended, and have issued
our report thereon dated December 17, 2002 (included in Falcon Products,
Inc.'s 2002 Annual Report and incorporated by reference in this Form 10-K).
Our audit also included Schedule I and Schedule II as of November 2, 2002,
and for the year then ended, included in this Form 10-K. These schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audit.
In our opinion, the financial statement schedules as of November 2, 2002,
and for the year then ended, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ERNST & YOUNG, LLP
St. Louis, Missouri,
December 17, 2002
REPORT OF PREVIOUS INDEPENDENT PUBLIC ACCOUNTANTS
-------------------------------------------------
This is a copy of the audit report previously issued by Arthur Andersen LLP
in connection with Falcon Products, Inc.'s filing on Form 10-K for the year
ended November 3, 2001. This audit report has not been reissued by Arthur
Andersen LLP in connection with this filing on Form 10-K. See Exhibit 23.2
for further discussion.
TO FALCON PRODUCTS, INC.:
We have audited in accordance with auditing standards generally accepted in
the United States, the financial statements included in Falcon Products,
Inc. 2001 Annual Report to Stockholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated December 14, 2001. 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 state 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 14, 2001
- 13 -
FALCON PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE I-GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS
FALCON PRODUCTS, INC.
CONSOLIDATING CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED NOVEMBER 2, 2002
Parent Total Total
Company Guarantor Non-Guarantor Eliminations Total
------- --------- ------------- ------------ -----
Net sales $ - $ 258,317 $ 30,972 $ (11,752) $ 277,537
Cost of sales - 198,104 26,050 (11,752) 212,402
Special and nonrecurring items - (162) - - (162)
Selling, general and administrative - 42,543 3,604 - 46,147
--------------- -------------- -------------- -------------- --------------
Operating profit - 17,832 1,318 - 19,150
Equity in earnings of subsidiaries 692 - - (692) -
Minority interest in consolidated
subsidiaries - 59 - - 59
Interest expense, net - 16,948 133 - 17,081
--------------- -------------- -------------- -------------- --------------
Net earnings before income taxes 692 825 1,185 (692) 2,010
Income tax expense - 904 414 - 1,318
--------------- -------------- -------------- -------------- --------------
Net earnings (loss) $ 692 $ (79) $ 771 $ (692) $ 692
=============== ============== ============== ============== ==============
FALCON PRODUCTS, INC.
CONSOLIDATING CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED NOVEMBER 3, 2001
Parent Total Total
Company Guarantor Non-Guarantor Eliminations Total
------- --------- ------------- ------------ -----
Net sales $ - $ 304,751 $ 20,167 $ (10,802) $ 314,116
Cost of sales, including nonrecurring
items - 236,342 17,732 (10,802) 243,272
Special and nonrecurring items - 12,642 - - 12,642
Selling, general and administrative - 53,693 2,479 - 56,172
--------------- -------------- -------------- -------------- --------------
Operating profit - 2,074 (44) - 2,030
Equity in loss of subsidiaries (10,771) - - 10,771 -
Minority interest in consolidated
subsidiaries - (133) - - (133)
Interest expense, net - 16,972 177 - 17,149
--------------- -------------- -------------- -------------- --------------
Net earnings loss before income
taxes (10,771) (14,765) (221) 10,771 (14,986)
Income tax expense (benefit) - (4,032) (183) - (4,215)
--------------- -------------- -------------- -------------- --------------
Net earnings (loss) $ (10,771) $ (10,733) $ (38) $ 10,771 $ (10,771)
=============== ============== ============== ============== ==============
FALCON PRODUCTS, INC.
CONSOLIDATING CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED OCTOBER 28, 2000
Parent Total Total
Company Guarantor Non-Guarantor Eliminations Total
------- --------- ------------- ------------ -----
Net sales $ - $ 321,346 $ 20,401 $ (10,669) $ 331,078
Cost of sales - 237,209 17,360 (10,669) 243,900
Selling, general and administrative - 51,360 2,427 - 53,787
--------------- -------------- -------------- -------------- --------------
Operating profit - 32,777 614 - 33,391
Equity of earnings of subsidiaries 9,196 - - (9,196) -
Minority interest in consolidated
subsidiaries - (2) - - (2)
Interest expense, net - 16,971 178 - 17,149
--------------- -------------- -------------- -------------- --------------
Net earnings before income
taxes 9,196 15,808 436 (9,196) 16,244
Income tax expense - 6,768 280 - 7,048
--------------- -------------- -------------- -------------- --------------
Net earnings $ 9,196 $ 9,040 $ 156 $ (9,196) $ 9,196
=============== ============== ============== ============== ==============
- 14 -
FALCON PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE I-GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS
FALCON PRODUCTS, INC.
CONSOLIDATING CONDENSED BALANCE SHEET
NOVEMBER 2, 2002
Parent Total Total
Company Guarantor Non-Guarantor Eliminations Total
------- --------- ------------- ------------ -----
Assets
Cash and cash equivalents $ - $ 378 $ 1,268 $ - $ 1,646
Accounts receivable - 29,695 3,247 - 32,942
Inventories - 49,276 7,841 - 57,117
Other assets - 8,236 805 - 9,041
--------------- -------------- -------------- -------------- --------------
Total current assets - 87,585 13,161 - 100,746
Property plant and equipment, net - 26,338 14,544 - 40,882
Investment in subsidiaries 61,000 - - (61,000) -
Intangibles and other assets - 131,949 - - 131,949
--------------- -------------- -------------- -------------- --------------
Total assets $ 61,000 $ 245,872 $ 27,705 $ (61,000) $ 273,577
=============== ============== ============== ============== ==============
Liabilities and Stockholders' Equity
Current liabilities $ - $ 56,263 $ 5,524 $ - $ 61,787
Long-term debt - 133,834 1,392 - 135,226
Other long-term liabilities - 15,394 170 - 15,564
Intercompany payable (receivable) - (9,126) 9,126 - -
--------------- -------------- -------------- -------------- --------------
Total liabilities - 196,365 16,212 - 212,577
--------------- -------------- -------------- -------------- --------------
Stockholders' equity 61,000 49,507 11,493 (61,000) 61,000
--------------- -------------- -------------- -------------- --------------
Total liabilities and stockholders'
equity $ 61,000 $ 245,872 $ 27,705 $ (61,000) $ 273,577
=============== ============== ============== ============== ==============
FALCON PRODUCTS, INC.
CONSOLIDATING CONDENSED BALANCE SHEET
NOVEMBER 3, 2001
Parent Total Total
Company Guarantor Non-Guarantor Eliminations Total
------- --------- ------------- ------------ -----
Assets
Cash and cash equivalents $ - $ 1,505 $ 165 $ - $ 1,670
Accounts receivable - 32,740 2,528 - 35,268
Inventories - 44,532 4,692 - 49,224
Other assets - 6,068 909 - 6,977
--------------- -------------- -------------- -------------- --------------
Total current assets - 84,845 8,294 - 93,139
Property plant and equipment, net - 30,460 12,074 - 42,534
Investment in subsidiaries 60,041 - - (60,041) -
Intangibles and other assets - 131,794 - - 131,794
--------------- -------------- -------------- -------------- --------------
Total assets $ 60,041 $ 247,099 $ 20,368 $ (60,041) $ 267,467
=============== ============== ============== ============== ==============
Liabilities and Stockholders' Equity
Current liabilities $ - $ 57,284 $ 3,583 $ - $ 60,867
Long-term debt - 135,110 1,351 - 136,461
Other long-term liabilities - 10,098 - - 10,098
Intercompany payable (receivable) - (4,712) 4,712 - -
--------------- -------------- -------------- -------------- --------------
Total liabilities - 197,780 9,646 - 207,426
--------------- -------------- -------------- -------------- --------------
Stockholders' equity 60,041 49,319 10,722 (60,041) 60,041
--------------- -------------- -------------- -------------- --------------
Total liabilities and stockholders'
equity $ 60,041 $ 247,099 $ 20,368 $ (60,041) $ 267,467
=============== ============== ============== ============== ==============
- 15 -
FALCON PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE I-GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS
FALCON PRODUCTS, INC.
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOW
FOR THE YEAR ENDED NOVEMBER 2, 2002
Parent Total Total
Company Guarantor Non-Guarantor Eliminations Total
------- --------- ------------- ------------ -----
Net cash provided by (used in)
operating activities $ - $ (2,986) $ 2,798 $ - $ (188)
Net cash provided by (used in)
investing activities (379) 21 (1,736) - (2,094)
Cash flows used in financing activities
Common stock issuance 379 - - - 379
Additions to long-term debt, net - 1,838 41 - 1,879
--------------- -------------- -------------- -------------- --------------
Net cash provided by financing
activities 379 1,838 41 - 2,258
--------------- -------------- -------------- -------------- --------------
Net change in cash and cash equivalents $ - $ (1,127) $ 1,103 $ - $ (24)
=============== ============== ============== ============== ==============
FALCON PRODUCTS, INC.
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOW
FOR THE YEAR ENDED NOVEMBER 3, 2001
Parent Total Total
Company Guarantor Non-Guarantor Eliminations Total
------- --------- ------------- ------------ -----
Net cash provided by (used in)
operating activities $ - $ 11,303 $ (427) $ - $ 10,876
Net cash provided by (used in)
investing activities 580 (5,857) (528) - (5,805)
Cash flows used in financing activities
Common stock issuance 475 - - - 475
Cash dividends (1,055) - - - (1,055)
Additions to(repayment of)
long-term debt, net - (6,864) 114 (6,750)
--------------- -------------- -------------- -------------- --------------
Net cash provided by (used in)
financing activities (580) (6,864) 114 - (7,330)
--------------- -------------- -------------- -------------- --------------
Net change in cash and cash equivalents $ - $ (1,418) $ (841) $ - $ (2,259)
=============== ============== ============== ============== ==============
FALCON PRODUCTS, INC.
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOW
FOR THE YEAR ENDED OCTOBER 28, 2000
Parent Total Total
Company Guarantor Non-Guarantor Eliminations Total
------- --------- ------------- ------------ -----
Net cash provided by (used in)
operating activities $ - $ 19,832 $ (2,490) $ - $ 17,342
Net cash provided by (used in)
investing activities 866 (8,198) 2,005 - (5,327)
Cash flows used in financing activities
Common stock issuance 528 - - - 528
Cash dividends (1,394) - - - (1,394)
Repayment of long-term debt, net - (9,610) (488) - (10,098)
--------------- -------------- -------------- -------------- --------------
Net cash used in financing activities (866) (9,610) (488) - (10,964)
--------------- -------------- -------------- -------------- --------------
Net change in cash and cash equivalents $ - $ 2,024 $ (973) $ - $ 1,051
=============== ============== ============== ============== ==============
- 16 -
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
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
- -------------- ------------------ ------------------ ------------------ -------------- -------------
Allowance for doubtful
accounts and anticipated
returns:
Year ended November 2, 2002 $ 949 $ 183 $ -- $ 425(A) $ 707
======= ======== ======== ======== ========
Year ended November 3, 2001 $ 1,256 $ 345 $ -- $ 652(A) $ 949
======= ======== ======== ======== ========
Year ended October 28, 2000 $ 1,352 $ 485 $ -- $ 581(A) $ 1,256
======= ======== ======== ======== ========
- ------------
(A) Accounts charged off less recoveries and returns.
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
- -------------- ------------------ ------------------ ------------------ -------------- -------------
2001 Special and Nonrecurring
Item Reserve:
Year ended November 2, 2002 $ 2,836 $ (162) $ -- $ 2,424 $ 250
======= ======== ======== ======== ========
Year ended November 3, 2001 $ -- $ 18,642 $ -- $ 15,806 $ 2,836
======= ======== ======== ======== ========
Year ended October 28, 2000 $ -- $ -- $ -- $ -- $ --
======= ======== ======== ======== ========
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
- -------------- ------------------ ------------------ ------------------ -------------- -------------
1999 Special and Nonrecurring
Item Reserve:
Year ended November 2, 2002 $ -- $ -- $ -- $ -- $ --
======= ======== ======== ======== ========
Year ended November 3, 2001 $ -- $ -- $ -- $ -- $ --
======= ======== ======== ======== ========
Year ended October 28, 2000 $ 1,566 $ -- $ -- $ 1,566 $ --
======= ======== ======== ======== ========
- 17 -
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 28, 2003 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 28, 2003 /s/ Franklin A. Jacobs
----------------------------------
Franklin A. Jacobs,
Chairman of the Board,
Chief Executive Officer
and Director
(Principal Executive Officer)
Date: January 28, 2003 /s/ Michael J. Dreller
----------------------------------
Michael J. Dreller,
Vice President, Chief
Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
Date: January 28, 2003 /s/ Steven C. Roberts
----------------------------------
Steven C. Roberts, Director
Date: January 28, 2003 /s/ Melvin F. Brown
----------------------------------
Melvin F. Brown, Director
Date: January 28, 2003 /s/ Michael F. Shanahan
----------------------------------
Michael F. Shanahan, Director
Date: January 28, 2003 /s/ Martin Blaylock
----------------------------------
Martin Blaylock, Director
Date: January 28, 2003 /s/ S. Lee Kling
----------------------------------
S. Lee Kling, Director
Date: January 28, 2003 /s/ Lee M. Liberman
----------------------------------
Lee M. Liberman, Director
Date: January 28, 2003 /s/ David L. Morley
----------------------------------
David L. Morley, Director
- 18 -
Chief Executive Officer Certification
I, Franklin A. Jacobs certify that:
1. I have reviewed this annual report on Form 10-K of Falcon Products,
Inc. (the "Registrant").
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report.
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this annual report.
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date");
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of Registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal controls; and
6. The Registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: January 28, 2003
/s/ Franklin A. Jacobs
--------------------------------------
Franklin A. Jacobs
Chairman of the Board, Chief Executive
Officer and Director
- 19 -
Chief Financial Officer Certification
I, Michael J. Dreller certify that:
1. I have reviewed this annual report on Form 10-K of Falcon Products,
Inc. (the "Registrant").
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report.
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this annual report.
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date");
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of Registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal controls; and
6. The Registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: January 28, 2003
/s/ Michael J. Dreller
--------------------------------------
Michael J. Dreller
Vice President, Finance and Chief
Financial Officer
- 20 -
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------
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 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.
10.3 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").
10.4(a) 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").
10.5(a) 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.
10.6(a) 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.
10.7(a) 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.
10.8(a) Falcon Products, Inc. Amended and Restated Stock Purchase Plan,
incorporated
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herein by reference to Exhibit 10.15 to 1991 10-K.
10.9(a) 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.
10.10(a) 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 Company's
Annual Report on Form 10-K for the year ended October 31, 1992.
10.11(a) 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").
10.12(a) 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 Company's Annual Report on Form 10-K for the
year ended October 29, 1994.
10.13(a) Amendment to the Non-Employee Director Stock Option Plan,
incorporated herein by Reference to Exhibit 10.26 to the April 27,
1996 10-Q.
10.14(a) 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").
10.15(a) Falcon Products, Inc. Non-Employee Directors' Deferred
Compensation Plan, Incorporated herein by reference to Exhibit
10.28 to the 1997 10-K.
10.16(a) Amendment No. 3 to the Falcon Products, Inc. Amended and Restated
1991 Stock Option Plan, incorporated herein by reference to
Exhibit 10.16 to the Company's Annual Report on Form 10-K for the
year ended October 28, 2000.
10.17(a) Employment Agreement dated December 6, 2000, by and between Falcon
Products, Inc. and David L. Morley, incorporated herein by
reference to Exhibit 10.17 to the Company's Annual Report on Form
10-K for the year ended October 28, 2000.
13 Selected Portions of the Annual Report to Stockholders for the
year ended November 2, 2002, filed herewith.
21 Subsidiaries of the Company, filed herewith.
23.1 Consent of Independent Public Accountants, filed herewith.
23.2 Information Regarding Consent of Arthur Andersen LLP, filed
herewith.
24 Power of Attorney (included on Signature Page hereto).
99.1 Certification of Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, filed herewith.
99.2 Certification of Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, filed herewith.
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(a) Management contract or compensatory plan or arrangement required
to be filed pursuant to Item 14(c) of Form 10-K.
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