Falcon Products Announces Expected Charge and Update on Financing Matters
January 04 2005 - 6:53PM
PR Newswire (US)
Falcon Products Announces Expected Charge and Update on Financing
Matters ST. LOUIS, Jan. 4 /PRNewswire-FirstCall/ -- Falcon
Products, Inc. (OTC:FCPR), a leading manufacturer of commercial
furniture, announced that it expects to record a significant charge
relating to the write-down of inventory. The amount of the
inventory write-down, and the underlying causes, are still under
review. Management currently estimates that the inventory
write-down will exceed $20 million, including approximately $4
million relating to a previously closed facility. However, such
estimate is preliminary and the actual amount of any inventory
write-down may be materially different from the preliminary
estimate. The Company had previously disclosed that certain
deficiencies in internal controls existed related to accounting for
inventory and that it intended to take certain actions to improve
inventory controls. Such actions included performance of a physical
inventory of finished goods and work in process on a quarterly
basis, improved cycle counting procedures, increased corporate
oversight of the controls and procedures over inventory and the
hiring of experienced inventory personnel. During the course of the
previously announced Audit Committee investigation, it has been
determined that these stated actions were either not taken or not
completely and properly implemented. As previously announced, the
Company hired a new chief financial officer in late October whose
responsibilities include addressing these deficiencies. The impact,
if any, of the expected inventory write-down on the results of the
first three quarters of fiscal year 2004, and on periods prior to
fiscal year 2004 has not yet been determined. Although the Company
believes that it is likely that the inventory write-down will
impact prior periods, no definitive conclusion has yet been reached
as to whether prior periods are affected or whether the impact on
prior periods will warrant a restatement of prior period financial
statements. As soon as practicable following the completion of its
investigation of the inventory write-down, the Company intends to
announce its final conclusions and, if necessary, file the required
amendments to its previous filings with the Securities and Exchange
Commission. As previously announced, the Company's Audit Committee
commenced an investigation, with the assistance of independent
counsel, into certain accounting matters. The Audit Committee
investigation is ongoing. On December 20, 2004, the SEC informed
the Company that it is conducting a non-public inquiry into certain
accounting matters including inventory-related issues. The Company
intends to fully cooperate with this inquiry. The Company also
previously announced that it was not in compliance with certain
provisions under its senior credit facilities. The Company has been
advised by its lenders that, while the Company's request for
waivers of such defaults are under review, the lenders are
unwilling to provide such waivers at this time. Any restatement of
the Company's financial statements for prior periods could result
in additional events of default under the Company's various debt
agreements. Although the defaults under the senior credit
facilities are continuing, the Company continues to have access to
borrowings under its revolving credit facility and its ability to
serve its customers and pay its employees and vendors in the
ordinary course has not been affected. On December 15, 2004, the
Company announced that it was utilizing the 30-day grace period
relating to the payment of interest under its $100 million 11 3/8%
Senior Subordinated Notes due 2009 (the "Notes"). Although a final
determination has not yet been made as to whether the Company will
be able to make the interest payment prior to the expiration of the
grace period on January 14, 2005, it is currently likely that such
payment will not be made. The non-payment of the interest would
constitute an event of default under the Notes as well as under the
Company's senior credit facilities. The Company has had preliminary
discussions with a large holder of the Notes regarding a possible
transaction that would convert the Notes to equity, however, the
feasibility of such a transaction has not yet been determined. In
addition, the Company, along with its financial advisor Imperial
Capital LLC, is evaluating various strategic alternatives relating
to a possible restructuring of the Company's outstanding
indebtedness. 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 8
manufacturing facilities throughout the world and has approximately
2,100 employees. Certain statements in this press release that are
not historical facts may be "forward-looking statements." Actual
events may differ materially from those projected in any
forward-looking statement. There are a number of important factors
involving risks and uncertainties beyond the control of the Company
that could cause actual events to differ materially from those
expressed or implied by such statements. Such factors include the
results of the Company's investigation, the ability of the Company
to successfully implement improvements in inventory controls, the
SEC's ongoing informal inquiry with respect to the Company, the
continued willingness of the Company's revolving lenders to provide
access to the Company's credit lines, the continued forbearance by
the Company's lenders from exercising remedies under the Company's
credit arrangements, the Company's success with its liquidity
improvement initiatives, and the Company's ability to restructure
its outstanding indebtedness. The Company disclaims any intention
or obligation to update publicly or revise such statements, whether
as a result of new information, future events or otherwise. FOR
FURTHER INFORMATION AT THE COMPANY: Franklin A. Jacobs 9387 Dielman
Industrial Drive St. Louis, MO 63132 (314) 991-9200 DATASOURCE:
Falcon Products, Inc. CONTACT: Franklin A. Jacobs of Falcon
Products, Inc., +1-314-991-9200
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