Exhibit 99.1
[FALCON logo]
PRESS RELEASE
FOR FURTHER INFORMATION
AT THE COMPANY:
Franklin A. Jacobs
9387 Dielman Industrial Drive
St. Louis, MO 63132
(314) 991-9200
FOR IMMEDIATE RELEASE: Tuesday, January 4, 2005
FALCON PRODUCTS ANNOUNCES EXPECTED CHARGE AND UPDATE ON
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FINANCING MATTERS
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ST. LOUIS, MISSOURI, January 4, 2005 - Falcon Products, Inc. (Pink
Sheets: FCPR.PK), 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
[FALCON logo]
PRESS RELEASE
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.
[FALCON logo]
PRESS RELEASE
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.