Falcon Products Reports Results for Fiscal 2003 Fourth Quarter and
Full Year; Announces Restructured Senior Credit Facility Company
announces new issuance of junior subordinated convertible
debentures ST. LOUIS, Feb. 11 /PRNewswire-FirstCall/ -- Falcon
Products, Inc. , a leading manufacturer of commercial furniture,
today announced sales and operating results for its fourth quarter
and full fiscal year 2003. While sales and earnings were less than
the prior year, earnings were impacted by largely non-cash charges
associated with the previously announced restructuring of its
manufacturing operations and a change in the accounting treatment
of net deferred tax assets. The restructuring actions should
generate $8 to $10 million in savings in 2004. The Company also
announced a refinancing package which substantially increases its
credit facility at improved interest rates and more flexible
covenants. This in combination with the restructuring of its
manufacturing operations strongly positions the Company going into
2004. Net sales for the fourth quarter of 2003 were $65.7 million,
compared with $75.8 million in the fourth quarter of 2002. The
Company reported a net loss for the quarter of $16.0 million, or
$1.77 per diluted share, including nonrecurring charges, compared
with net earnings of $1.2 million, or $0.13 per diluted share,
including a nonrecurring gain, in the fourth quarter of 2002. The
fourth-quarter 2003 results include charges related to the
restructuring of the Company's manufacturing facilities, the
write-down of inventory costs, and the recording of a valuation
allowance for net deferred tax assets. These charges totaled $13.1
million, or $1.45 per diluted share. For the 2003 fiscal year, net
sales were $251.8 million, compared with $277.5 million in the
prior year. The Company reported a net loss for the year of $22.5
million, or $2.49 per diluted share, including nonrecurring
charges, compared with net earnings of $0.7 million, or $0.08 per
diluted share, including a net nonrecurring gain, in 2002. The 2003
results include charges related to the restructuring of the
Company's manufacturing facilities, the freezing of benefits under
the Company's defined benefit pension plan, the write-off of
deferred debt issuance costs, the write-down of inventory costs,
and the recording of a deferred tax valuation allowance. These
charges totaled $18.3 million, or $2.02 per diluted share. Franklin
A. Jacobs, Chairman and Chief Executive Officer, said, "Despite the
difficult market conditions in 2003, the Company achieved solid
growth in the contract office market and strong growth in the food
service market, excluding the impact from the business with Boston
Market, which was successfully completed at the beginning of 2003.
While the hospitality market is showing signs of improving, it did
not translate into sales during the fourth quarter." David L.
Morley, President and Chief Operating Officer, added, "Although
2003 was a more difficult year for our industry than anyone
expected, we have made the changes necessary to significantly
improve profitability. The previously announced closure of the
facilities in Zacatecas, Mexico and Canton, Mississippi will
substantially reduce costs, simplify processes and increase speed
of our operations. Additionally, the Company restructured its wood
frame supply chain in Europe, taking both time and costs out of the
system. The full year impact of these actions, on 2003 level of
sales, is in the range of $8 to $10 million of operating income."
The Company further announces an expanded debt facility that
provides substantial operating flexibility at lower interest rates
and improved covenants. This was accomplished in two ways. First,
the company sold $4.15 million in newly issued 12% junior
subordinated convertible debentures due 2010. The debentures, which
were primarily purchased by directors and other related parties of
the Company, are junior to the Company's existing senior
subordinated notes. Secondly, the Company amended and restated its
senior credit facility. The facility was restructured to pay off
the existing term loan B in the original principal amount of $35
million and obtain a new term loan B in the principle amount of $50
million. In addition, the interest rate provisions for the term
loan B portion were adjusted down to 15%, and the covenant
provisions of the facility were improved. The new term loan B
matures in June 2007. The proceeds of the new term loan B were used
to pay off the existing term loan B in full and to pay fees and
expenses incurred in connection with the refinancing and the
remainder of the net proceeds, as well as the proceeds from the
issuance of the debentures, will be used for working capital and
general corporate purposes. Mr. Jacobs stated, "The new financing
agreement will provide the capital, at a lower interest rate, to
fully execute our plans. Our cost structure has been dramatically
changed and our markets appear to be strengthening. We are in an
excellent position going into 2004." Falcon Products, Inc. will
conduct a conference call to discuss fiscal 2003 fourth-quarter
results on February 12, 2004, at 10:00 a.m. EST. The call will be
Web cast at http://www.companyboardroom.com/ and
http://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 9 manufacturing facilities throughout the world
and has approximately 2,000 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. FALCON PRODUCTS, INC. CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS FOURTH QUARTER AND FISCAL
YEAR 2003 RESULTS (In thousands, except per share amounts)
(Unaudited) Fourth Quarter Ended Year Ended Nov. 1, Nov. 2, % Nov.
1, Nov. 2, % 2003 2002 Change 2003 2002 Change Net sales $ 65,652
$75,790 -13.4% $251,802 $277,537 -9.3% Cost of sales, including
restructuring charge 58,588(a) 58,225 0.6% 203,087(a) 212,402 -4.4%
Gross margin 7,064 17,565 -59.8% 48,715 65,135 -25.2% Selling,
general and administrative expenses 11,974 11,685 2.5% 44,576
46,147 -3.4% Interest and other 5,049 4,292 17.6% 17,781 17,140
3.7% Loss on early extinguishment of debt - - N/M 1,564(b) - N/M
Loss on curtailment of pension plan 121(c) - N/M 1,954(c) - N/M
Restructuring charge 2,496(a) (801)(d)N/M 4,476(a) (162)(d)N/M
Pre-tax earnings (loss) (12,576) 2,389 N/M (21,636) 2,010 N/M
Income taxes (benefit) 3,432(e) 1,220 N/M 880(e) 1,318 N/M Net
earnings (loss) $(16,008) $1,169 N/M $(22,516) $ 692 N/M Basic and
diluted earnings (loss) per share $ (1.77) $ 0.13 N/M $ (2.49) $
0.08 N/M Weighted average diluted shares outstanding 9,068 8,948
9,059 8,943 N/M Not Meaningful (a) The Company recorded a $2.5
million non-cash, pre-tax restructuring charge during the fourth
quarter of 2003 to write-down the land, buildings, machinery and
equipment to estimated realizable values of the Canton, Mississippi
plant in connection with the Company's decision to dispose of the
facility. In addition, the Company recorded a $5.5 million charge
in Cost of Sales to reduce the carrying cost of inventory. The
Company recorded a $4.3 million non-cash restructuring chargeduring
the third quarter of 2003 to write-down the assets of the Company's
Mexico manufacturing facility in connection with the Company's
decision to dispose of the facility. Of the total charge related to
Zacatecas, $2.3 million is included in Cost of Sales. (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 $0.1 million in the fourth quarter of 2003
and a $1.8 million in the third quarter of 2003, non-cash, pre-tax
charge to record the unrecognized prior service cost in connection
with the closing of the Canton, Mississippi plant and with the
Company's amendment to its defined benefit pension plan to freeze
the accrual of pension benefits for service after August 1, 2003,
respectively. (d) The Company recorded a $0.6 million pre-tax
nonrecurring charge during the first quarter of 2002 to account for
the execution of its plan to restructure its manufacturing
facilities, which began in the third quarter of 2001. During the
fourth quarter of 2002, the Company recorded a pre-tax nonrecurring
gain related to asset disposals associated with its restructuring
plans, which included the closure of its Statesville, North
Carolina facility. (e) During the fourth quarter of 2003, the
Company recorded a valuation allowance reducing its deferred tax
assets. FALCON PRODUCTS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) (Unaudited) Liabilities and Nov 1, Nov 2,
Stockholders' Nov. 1, Nov. 2, Assets 2003 2002 Equity 2003 2002
Cash and cash equivalents $ 1,356 $ 1,646 Accounts payable $ 27,612
$ 20,841 Accounts receivable 31,877 32,942 Customer deposits 5,249
9,211 Inventories 62,525 57,117 Accrued liabilities 16,842 16,376
Other current Current maturities assets 5,344 9,041 of long-term
debt 3,900 15,359 Total current Total Current assets 101,102
100,746 liabilities 53,603 61,787 Property, plant Long-term debt
161,485 135,226 and equipment, net 36,579 40,882 Other long-term
obligations 12,868 15,564 Stockholders' Other assets 128,859
131,949 equity 38,584 61,000 $266,540 $273,577 $266,540 $273,577
DATASOURCE: Falcon Products, Inc. CONTACT: David L. Morley,
President & Chief Operating Officer, Falcon Products, Inc.,
+1-314-991-9200 Web site: http://www.thefalconcompanies.com/
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