AT THE COMPANY:
Michael J. Dreller
Vice President - Finance & CFO
9387 Dielman Industrial Drive
St. Louis, MO 63132 (314) 991-9200
FOR IMMEDIATE RELEASE
WEDNESDAY, SEPTEMBER 3, 2003
FALCON PRODUCTS REPORTS RESULTS FOR
FISCAL 2003 THIRD QUARTER
ST. LOUIS, MISSOURI, SEPTEMBER 3, 2003 -- Falcon Products,
Inc. (NYSE: FCP), a leading manufacturer of commercial furniture, today
announced sales and operating results for its fiscal third quarter ended
August 2, 2003.
Net sales for the third quarter of 2003 were $62.3 million,
compared with $70.8 million in the third quarter of 2002. The Company
reported a net loss for the quarter of $5.6 million, including nonrecurring
charges of $5.1 million, compared with net earnings of $0.3 million in the
third quarter of 2002. The Company reported $0.62 net loss per diluted share
for the quarter, including nonrecurring charges of $0.57 per diluted share,
compared with net earnings per diluted share of $0.04 in the third quarter
of 2002.
The third-quarter 2003 results include non-cash charges related to
the restructuring of the Company's manufacturing facilities, the freezing of
benefits under the Company's defined benefit pension plan, and the write-off
of deferred debt issuance costs. Excluding these nonrecurring charges,
reported third quarter 2003 results were a net loss of $0.5 million, or
$0.05 per diluted share.
Franklin A. Jacobs, Chairman and Chief Executive Officer, said "We
have significantly improved our cost structure in the last few years, but it
is critical that we continue to focus our efforts on driving cost
improvements in difficult times. We believe that the actions we have
announced will significantly reduce our operating costs and will lead to
improved financial performance as we move forward."
The Company announced plans to dispose of its manufacturing
facility in Zacatecas, Mexico. The production from the facility will be
transferred to the Company's Mimon, Czech Republic facility and other
outside suppliers. This initiative is expected to provide significant
operating efficiencies and reduce inventory levels. The Company recorded a
$3.0 million after-tax charge, or $0.33 per diluted share, to write-down the
assets of the facility associated with the planned disposition. The Company
also amended its defined benefit pension plan in order to freeze the accrual
of benefits under the plan for service after August 1, 2003. The Company
recorded a $1.1 million after-tax charge, or $0.13 per diluted share, to
record the charge associated with the amendment to the
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pension plan. The Company expects to begin realizing the benefits from these
cost reduction actions during the fourth quarter of 2003.
As previously announced, the Company entered into a new $75 million
senior credit facility in June 2003. In connection with the refinancing of
the senior credit agreement, the Company recorded a $1.0 million after-tax
charge, or $0.11 per diluted share, to write-off deferred debt issuance
costs. The Company's previous senior credit agreement would have matured in
April 2004. All of the nonrecurring charges that were recorded during the
period are for non-cash items.
David L. Morley, President and Chief Operating Officer, stated,
"During these challenging times, we have concentrated our efforts on cost
reduction measures and market share growth. The cost reduction measures that
we announced today are expected to contribute $5 - $7 million of pre-tax
savings in 2004. In addition, redesigning the European supply chain and
consolidating our manufacturing operations will reduce required inventory
levels by approximately $3 million. We expect to continue to find means of
driving our profitability through cost management, and we believe this will
drive profitability independent of the economy in 2004".
Falcon Products, Inc. will conduct a conference call to discuss
fiscal 2003 third-quarter results on September 4, 2003, at 10:00 a.m. EDT.
The call will be Web cast at www.companyboardroom.com and
www.thefalconcompanies.com.
Falcon Products, Inc. is the leader in the commercial furniture
markets it serves, with well-known brands, the largest manufacturing base
and the largest sales force. Falcon and its subsidiaries design, manufacture
and market products for the hospitality and lodging, food service, office,
healthcare and education segments of the commercial furniture market.
Falcon, headquartered in St. Louis, Missouri, currently operates 11
manufacturing facilities throughout the world and has approximately 2,600
employees.
Safe harbor statement under the Private Securities Litigation Reform Act of
1995: Statements contained in this news release which are not historical
fact, such as forward-looking statements, involve risks and uncertainties,
including, but not limited to, loss of key customers or suppliers within
specific industries, availability or cost of raw materials, and increased
competitive pricing pressures reflecting industry conditions. Additional
cautionary statements regarding other risk factors that could have an effect
on future performance of the Company are described in Falcon's periodic
filings with the Securities and Exchange Commission. Although Falcon
believes the expectations reflected in any forward-looking statements are
based on reasonable assumptions, Falcon can give no assurance that its
expectations will be attained. Any forward-looking statements represent the
best judgment of Falcon as of the date of this release. Falcon disclaims any
intent or obligation to update any forward-looking statements.
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FALCON PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
THIRD QUARTER AND FISCAL YEAR 2003 RESULTS
(In thousands, except per share amounts)
(Unaudited)
Third Quarter Ended Thirty-Nine Weeks Ended
----------------------------------- -------------------------------------
August 2, August 3, % August 2, August 3, %
2003 2002 Change 2003 2002 Change
---------- --------- ------ ---------- --------- ------
Net sales $ 62,306 $ 70,811 -12.0% $ 186,150 $ 201,747 -7.7%
Cost of sales, including restructuring charge 49,319 (a) 54,260 -9.1% 144,499 (a) 154,177 -6.3%
---------- --------- ---------- ---------
Gross margin 12,987 16,551 -21.5% 41,651 47,570 -12.4%
Selling, general and administrative expenses 11,193 11,277 -0.7% 32,602 34,464 -5.4%
Interest and other 4,552 4,501 1.1% 12,732 12,846 -0.9%
Loss on early extinguishment of debt 1,564 (b) - N/M 1,564 (b) - N/M
Loss on curtailment of pension plan 1,833 (c) - N/M 1,833 (c) - N/M
Restructuring charge 1,980 (a) - N/M 1,980 (a) 639 (d) N/M
---------- --------- ---------- ---------
Pre-tax earnings (loss) (8,135) 773 N/M (9,060) (379) N/M
Income taxes (benefit) (2,551) 439 N/M (2,552) 98 N/M
---------- --------- ---------- ---------
Net earnings (loss) $ (5,584) $ 334 N/M $ (6,508) $ (477) N/M
========== ========= ========== =========
Basic and diluted earnings (loss) per share $ (0.62) $ 0.04 N/M $ (0.72) $ (0.05) N/M
========== ========= ========== =========
Weighted average diluted shares outstanding 9,062 8,946 9,056 8,941
========== ========= ========== =========
N/M Not Meaningful
(a) The Company recorded a $4.3 million non-cash, pre-tax restructuring charge during the third quarter of 2003 to write-down
the assets of the Company's Zacatecas, Mexico manufacturing facility in connection with the Company's decision to dispose of
the facility. Of the total charge, $2.3 million is included in Cost of Sales in the Consolidated Statement of Earnings.
(b) The Company recorded a $1.6 million non-cash, pre-tax loss on early extinguishment of debt to write-off deferred debt
issuance costs in connection with the refinancing of its senior credit facility.
(c) The Company recorded a $1.8 million non-cash, pre-tax charge to record the unrecognized prior service cost in connection
with the Company's amendment to its defined benefit pension plan to freeze the accrual of pension benefits for service after
August 1, 2003.
(d) The Company recorded a $0.6 million pre-tax restructuring charge during the first quarter of 2002 to account for the
execution of its manufacturingstrategy, which included the closure of its Statesville, North Carolina facility, and the
transfer of production into the Company's other plants.
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FALCON PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
August 2, Nov. 2, Liabilities and August 2, Nov. 2,
Assets 2003 2002 Stockholders' Equity 2003 2002
------ --------- ---------- -------------------- --------- --------
Cash and cash equivalents $ 1,577 $ 1,646 Accounts payable $ 20,349 $ 20,841
Accounts receivable 30,977 32,942 Customer deposits 5,390 9,211
Inventories 64,437 57,117 Accrued liabilities 11,460 16,376
Other current assets 10,645 9,041 Current maturities of
long-term debt 4,112 15,359
--------- ---------- -------- --------
Total current assets 107,636 100,746 Total current liabilities 41,311 61,787
Property, plant and Long-term debt 165,108 135,226
equipment, net 38,415 40,882
Other long-term obligations 13,342 15,564
Other assets 129,558 131,949 Stockholders' equity 55,848 61,000
-------- -------- -------- --------
$275,609 $273,577 $275,609 $273,577
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