<PAGE>

Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion should be read in conjunction with the audited
Consolidated Financial Statements and the notes thereto.
     Certain information presented herein includes "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. However, there can be no assurance that the
Company's actual results will not differ materially from its
expectations. The matters referred to in forward-looking statements may
be affected by risks and uncertainties affecting the Company's business.

Continuing Operations
During the last several years, the Company has made two significant
acquisitions as part of its long-term strategic plan to consolidate its
industry and to create the single premier supplier to the commercial
contract furniture market. In 1999, the Company acquired Shelby Williams
Industries, Inc. (Shelby Williams), a leading manufacturer of contract
seating primarily for the hospitality market. The acquisition positioned
the Company as the industry leader. In 1998, the Company acquired Howe
Furniture Corporation (Howe). Howe specializes in the design,
engineering and marketing of tables for the contract and hospitality
markets.

The following table sets forth, for the periods presented, certain
information relating to the continuing operations of the Company,
expressed as a percentage of net sales:

<TABLE>
<CAPTION>
Operating Results as a Percentage of Sales                 October 30, 1999        October 31, 1998     November 1, 1997
========================================================================================================================
<S>                                                                   <C>                     <C>                  <C>
Net sales                                                             100.0%                  100.0%               100.0%
------------------------------------------------------------------------------------------------------------------------
Cost of sales, including nonrecurring items                            73.7                    71.8                 70.3
------------------------------------------------------------------------------------------------------------------------
Special and nonrecurring items                                          4.7                     0.2                  3.3
------------------------------------------------------------------------------------------------------------------------
Gross margin                                                           21.6                    28.0                 26.4
------------------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses                           17.7                    20.6                 19.5
------------------------------------------------------------------------------------------------------------------------
Operating profit                                                        3.9                     7.4                  6.9
------------------------------------------------------------------------------------------------------------------------
Interest expense (income), net                                          3.2                      .4                 (0.1)
------------------------------------------------------------------------------------------------------------------------
Minority interest in consolidated subsidiary                             --                      --                   --
------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before income taxes                 0.7                     7.0                  7.0
------------------------------------------------------------------------------------------------------------------------
Income tax expense                                                      0.4                     2.6                  2.6
------------------------------------------------------------------------------------------------------------------------
Net earnings from continuing operations                                 0.3                     4.4                  4.4
========================================================================================================================
Supplemental Information - Before Special and Nonrecurring Items
------------------------------------------------------------------------------------------------------------------------
  Gross margin                                                         27.9%                   30.4%                29.7%
------------------------------------------------------------------------------------------------------------------------
  Operating profit                                                     10.2                     9.8                 10.1
------------------------------------------------------------------------------------------------------------------------
  Earnings from continuing operations before income taxes               6.9                     9.5                 10.2
------------------------------------------------------------------------------------------------------------------------
  Net earnings from continuing operations                               4.2                     6.0                  6.4
========================================================================================================================
</TABLE>

Net Sales
In 1999, net sales from continuing operations were $222.5 million, an
increase of 55.1% over 1998 net sales of $143.4 million. The sales
increase over the prior year primarily is the result of the Shelby
Williams acquisition and increased sales to the national accounts and
contract office markets. Management believes that the addition of the
Shelby Williams sales force and customer relationships will be excellent
assets for the Company.
     Net sales from continuing operations in 1998 were $143.4 million,
an increase of 26.9% over 1997 net sales of $113.0 million. The sales
increase over the prior year primarily resulted from the Howe
acquisition and increased sales to the hospitality market.

Costs and Expenses
The Company's reported operating results for fiscal years 1999, 1998 and
1997 included special and nonrecurring items associated with various
strategic initiatives the Company has undertaken. Those items make
direct comparisons of the reported results difficult.
     During 1999, in conjunction with the acquisition of Shelby
Williams, the Company recorded a pre-tax integration charge of $14.0
million, $8.7 million after taxes or $0.97 per share, to cover the
anticipated costs of combining its existing business with the acquired
business. The charge relates to closing certain manufacturing facilities
and transferring production from the closed facilities into the
Company's existing facilities.

          16


<PAGE>
<PAGE>
This one-time charge includes costs associated with asset write-downs
and dispositions, real estate exit costs, employee severance, and other
related costs associated with exiting the closed facilities. Cost of
sales includes a $3.5 million charge to write down the carrying value of
inventory with the remaining components of the charge being reported in
the Special and Nonrecurring Items in the accompanying Consolidated
Statements of Earnings.
     During 1998, the Company recorded a $4.7 million pre-tax charge,
$2.9 million after-tax or $.32 per share, related to management's
decision to discontinue the Company's hotel casegoods line of business.
The charge entailed the writedown of assets, including inventories,
equipment and goodwill, associated with the product line located in the
Tijuana, Mexico, facility. Cost of sales includes a $3.3 million pre-tax
charge to write down the carrying value of inventory. The remaining
components of the charge have been reported in Special and Nonrecurring
Items in the Consolidated Statements of Earnings.
     Also during 1998, the Company recorded a $1.3 million pre-tax
gain, $0.8 million after-tax or $.09 per share, on the sale of the
Company's corporate headquarters building. The gain has been reported in
Special and Nonrecurring Items in the Consolidated Statements of
Earnings.
     During the fourth quarter of 1998, the Company recorded an
additional pre-tax charge of $0.2 million, $0.1 million after-tax or
$.01 per share, related to the consolidation of the Company's
manufacturing facilities that was announced in 1997. These charges are
reported in Special and Nonrecurring Items in the Consolidated
Statements of Earnings.
     During 1997, the Company recorded a pre-tax charge of $3.7
million, $2.3 million after-tax or $.23 per share, for charges
associated with the announced consolidation of the Company's
manufacturing operations at its Anaheim, California, and Belding,
Michigan, facilities into its City of Industry, California, facility and
the elimination of several duplicative and nonperforming wood seating
product lines. These charges are reported in Special and Nonrecurring
Items in the Consolidated Statements of Earnings.
     During 1999, the Company's gross margin increased to $48.0
million, or 19.7% over 1998's gross margin of $40.1 million, primarily
due to increased sales volume. Gross margin as a percent of sales,
excluding the special and nonrecurring items decreased to 27.9% in 1999
from 30.4% in 1998. The decrease was primarily attributed to the
addition of the Shelby Williams' business, as Shelby Williams' historic
gross margins were lower than the Company's historic gross margins.
Also, combining the business resulted in excess manufacturing capacity,
and as a result, the Company decided to close its Lewisville, Arkansas,
City of Industry, California, and the Tijuana, Mexico, facilities. These
closings negatively impacted the gross margin percentage for the year,
although the Company expects significant future benefits from these
closings.
     In 1998, the Company's gross margin increased to $40.1 million
from $29.8 million in 1997, a 34.5% increase which was primarily due to
increased sales volume. Gross margin as a percent of sales, excluding
the special and nonrecurring items, increased to 30.4% in 1998 from
29.7% in 1997. The increase is primarily due to product mix and
incremental sales from the Howe acquisition which maintained a higher
gross margin percentage than the Company's historical business. In
addition, during the first half of 1998, the Company consolidated the
Belding, Michigan, and Anaheim, California, facilities into the City of
Industry, California, facility to benefit from economies of scale and
further reduce its fixed overhead costs. During the fourth quarter of
1998, the Company began to exit the hotel casegoods market which began
to have a favorable impact on the gross margin percentage during the
quarter.
     Selling, general and administrative expenses were $39.3 million,
$29.5 million and $22.0 million in 1999, 1998 and 1997, respectively.
The overall increase is principally related to the aforementioned
acquisitions, higher level of business and increased sales and marketing
programs including salaries, commissions, travel and literature. As a
percentage of net sales, the expense rate was 17.7% in 1999, 20.6% in
1998 and 19.5% in 1997. The decrease in the expense rate in 1999 is
primarily due to the Shelby Williams acquisition which previously
maintained a lower expense rate than the Company and cost savings
resulting from the elimination of duplicative selling and administrative
expenses from combining the two businesses.
     The increase in the expense rate in 1998 compared with 1997 was
primarily due to the Howe acquisition which previously maintained a
higher expense rate than the Company.

Interest and Taxes
Net interest expense was $7.3 million in 1999, compared with $0.6
million in 1998 and interest income of $0.1 million in 1997. The
increased interest expense in 1999 was due to outstanding borrowings as
a result of the Shelby Williams acquisition, the interest expense in
1998 was due to the Howe acquisition. The interest income during 1997
was due primarily to interest received on the proceeds from the sale of
the William Hodges division in late 1997.
     Income tax expense was $0.9 million, $3.7 million and $3.0 million
in 1999, 1998 and 1997, respectively. The effective

                                                           17



<PAGE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results
of Operations

income tax rate was 59.9% in 1999, 36.8% in 1998, and 38.0% in 1997. The
higher effective tax rate in 1999 is due to nondeductible goodwill
charges representing a greater percentage of pre-tax earnings.

Net Earnings
Net earnings from operations decreased to $0.6 million, or $0.07 per
share, in 1999 from $6.4 million, or $0.68 per share, in 1998. The
decrease is due to the special and nonrecurring charge in 1999 related
to the integration of the Shelby Williams business. Excluding special
and nonrecurring items, net earnings were $9.3 million, or $1.04 per
share in 1999, compared with $8.6 million, or $0.92 per share, in 1998.
Excluding special and nonrecurring items, net earnings increased 8.0%
while earnings per share increased 13.0%.
     Net earnings from continuing operations in 1998 increased to $6.4
million, or $.68 per share, from $4.9 million, or $.50 per share, in
1997, an increase in earnings and earnings per share of 28.9% and 36.0%,
respectively. In 1998, net earnings were $6.4 million, compared with
$12.6 million in 1997, a decrease of 49.7%. Net earnings per share was
$.68 in 1998, compared with $1.28 in 1997, a 46.9% decrease. The
decrease was primarily due to the gain recognized from the sale of the
William Hodges division in 1997.
     Excluding the special and nonrecurring items reported in both 1998
and 1997, net earnings from continuing operations were $8.6 million, or
$.92 per share, compared with $7.2 million, or $.73 per share, in 1997,
resulting in an increase in earnings of 18.8% and an increase in
earnings per share of 26.0%.

Liquidity and Capital Resources
The Company's working capital at October 30, 1999, was $46.8 million and
its ratio of current assets to current liabilities was 1.8 to 1.0. Cash
provided by operating activities was $5.0 million in 1999 and $0.3
million in 1998.
     Cash used by investing activities in 1999 was $143.3 million,
compared with $17.4 million in 1998. The increase is due to the
acquisition of Shelby Williams. The Company invested $6.2 million in
1999 and $6.6 million in 1998 in capital additions primarily to increase
manufacturing capacities and to improve operating efficiencies, as well
as normal recurring capital replacements. The Company's capital budget
for 2000 is approximately $6.5 million, which will be used primarily to
acquire new equipment.
     Cash provided by financing activities was $136.1 million in 1999,
compared with $6.0 million in 1998. The increase in 1999 is due
primarily to borrowings under new credit facilities to finance the
Shelby Williams acquisition. During 1999 and 1998, the Company acquired
349,100 and 567,000 shares of its common stock, respectively, at a total
cost of $3.0 million and $7.5 million, respectively. The Company is
authorized to purchase up to 441,000 additional shares of its common
stock under the stock repurchase plan approved by the Board of
Directors.
     The Company has a $50.0 million unsecured revolving line of credit
agreement with a group of financial institutions. The revolving line of
credit bears annual interest at the Company's option, at the Prime Rate,
Federal Funds Rate or LIBOR adjusted for a spread based on the Company's
leverage ratio. As of October 30, 1999, there was no outstanding balance
under the revolving line of credit.
     The Company expects that it will meet its ongoing working capital
and capital requirements from a combination of existing cash, internally
generated funds and available borrowings under its revolving credit
facility. The Company's operating cash flows constitute its primary
internal source of liquidity.
     Generally, inflation has not had a material effect on the Company
in the past, and no such effect is expected in the near future.
Historically, the Company has been able to increase prices to offset
increases in the cost of manufacturing its products, and management
presently believes that the Company will continue to be able to do so.

Recently Issued Accounting Standards
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activity" provides comprehensive and consistent standards for the
recognition and measurement of derivative and hedging activities. It
requires that derivatives be recorded on the Statement of Consolidated
Financial Position at fair value and establishes criteria for hedges of
changes in the fair value of assets, liabilities or firm commitments,
hedges of variable cash flows of forecasted transactions, and hedges of
foreign currency exposures of net investments in foreign operations.
Changes in the fair value of derivatives that do not meet the criteria
for hedges would be recognized in the Statement of Consolidated Income.
The standard will be effective for the Company beginning November 3,
2001. The Company does not expect the adoption of SFAS No. 133 to have a
material effect on the consolidated financial statements.

          18




<PAGE>
<PAGE>
Consolidated Statements of Earnings
For the Years Ended October 30, 1999, October 31, 1998, and November 1, 1997
<TABLE>
<CAPTION>
In thousands, except per-share data                                    1999                    1998                 1997
========================================================================================================================
<S>                                                                <C>                     <C>                  <C>
Net sales                                                          $222,495                $143,426             $113,010
Cost of sales, including nonrecurring items                         163,992                 103,067               79,507
Special and nonrecurring items                                       10,500                     271                3,700
------------------------------------------------------------------------------------------------------------------------
Gross margin                                                         48,003                  40,088               29,803
Selling, general and administrative expenses                         39,289                  29,482               22,044
------------------------------------------------------------------------------------------------------------------------
Operating profit                                                      8,714                  10,606                7,759
Interest expense (income), net; including interest income of
  $225, $264 and $228, respectively                                   7,281                     619                 (139)
Minority interest in consolidated subsidiary                            (24)                    (64)                 (47)
------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before income taxes               1,457                  10,051                7,945
Income tax expense                                                      873                   3,701                3,019
------------------------------------------------------------------------------------------------------------------------
Net earnings from continuing operations                                 584                   6,350                4,926
Discontinued operations, net of tax                                      --                      --                  938
Gain on sale of discontinued operations, net of tax                      --                      --                6,770
------------------------------------------------------------------------------------------------------------------------
Net earnings                                                       $    584                $  6,350             $ 12,634
========================================================================================================================

Earnings per share - Basic:
Continuing operations                                              $   0.07                $   0.69             $   0.51
Discontinued operations                                                  --                      --                 0.10
Gain on sale of discontinued operations                                  --                      --                 0.70
------------------------------------------------------------------------------------------------------------------------
Net earnings per share                                             $   0.07                $   0.69             $   1.31
========================================================================================================================

Earnings per share - Diluted:
Continuing operations                                              $   0.07                $   0.68             $   0.50
Discontinued operations                                                  --                      --                 0.09
Gain on sale of discontinued operations                                  --                      --                 0.69
------------------------------------------------------------------------------------------------------------------------
Net earnings per share                                             $   0.07                $   0.68             $   1.28
========================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>

                                                                19

<PAGE>
<PAGE>

Consolidated Balance Sheets
For the Years Ended October 30, 1999, and October 31, 1998


<TABLE>
<CAPTION>
In thousands, except per-share data                                                            1999                 1998
========================================================================================================================
<S>                                                                                        <C>                  <C>
Assets
Current assets:
  Cash and cash equivalents                                                                $  2,878             $  5,186
  Accounts receivable, less allowances of $1,352 and $672, respectively                      47,733               22,683
  Inventories                                                                                49,078               24,877
  Prepayments and other current assets                                                        5,080                3,081
  ----------------------------------------------------------------------------------------------------------------------
    Total current assets                                                                    104,769               55,827
    --------------------------------------------------------------------------------------------------------------------
Property, plant and equipment:
  Land                                                                                        3,368                2,116
  Buildings and improvements                                                                 25,284               11,395
  Machinery and equipment                                                                    42,034               32,154
  ----------------------------------------------------------------------------------------------------------------------
                                                                                             70,686               45,665
  Less accumulated depreciation                                                              21,845               18,167
  ----------------------------------------------------------------------------------------------------------------------
    Net property, plant and equipment                                                        48,841               27,498
    --------------------------------------------------------------------------------------------------------------------
Other assets, net of accumulated amortization:
  Goodwill                                                                                  124,381               23,243
  Other                                                                                      14,215                5,406
  ----------------------------------------------------------------------------------------------------------------------
    Total other assets                                                                      138,596               28,649
    --------------------------------------------------------------------------------------------------------------------
Total assets                                                                               $292,206             $111,974
========================================================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                                                                         $ 20,890             $ 10,106
  Customer deposits                                                                          11,765                1,589
  Accrued liabilities                                                                        22,872                6,769
  Current maturities of long-term debt                                                        2,443                1,607
  ----------------------------------------------------------------------------------------------------------------------
    Total current liabilities                                                                57,970               20,071
    --------------------------------------------------------------------------------------------------------------------
Long-term obligations:
  Long-term debt                                                                            162,063               17,208
  Deferred income taxes                                                                          --                  876
  Minority interest in consolidated subsidiary                                                  786                  810
  Other                                                                                       2,086                1,063
  ----------------------------------------------------------------------------------------------------------------------
    Total liabilities                                                                       222,905               40,028
    --------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
  Common stock, $.02 par value: authorized 20,000,000 shares; issued 9,915,117                  198                  198
  Additional paid-in capital                                                                 47,376               47,376
  Treasury stock, at cost (1,265,151 and 992,777 shares, respectively)                      (15,455)             (13,557)
  Cumulative translation adjustments                                                           (221)                 (19)
  Retained earnings                                                                          37,403               37,948
  ----------------------------------------------------------------------------------------------------------------------
    Total stockholders' equity                                                               69,301               71,946
    --------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity                                                 $292,206             $111,974
========================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>

          20




<PAGE>
<PAGE>
Consolidated Statements of Stockholders' Equity
For the Years Ended October 30, 1999, October 31, 1998, and November 1, 1997

<TABLE>
<CAPTION>
                                                     Additional                    Cumulative                          Total
                                          Common        Paid-in       Treasury    Translation       Retained   Stockholders'
In thousands                               Stock        Capital          Stock    Adjustments       Earnings          Equity
============================================================================================================================
<S>                                         <C>         <C>           <C>             <C>            <C>             <C>
Balance, November 2, 1996                   $198        $47,260       $ (1,529)       $   274        $22,273         $68,476
  Net earnings                                --             --             --             --         12,634          12,634
  Translation adjustments                     --             --             --         (1,001)            --          (1,001)
  --------------------------------------------------------------------------------------------------------------------------
    Comprehensive income                                                                                              11,633
  Cash dividends                              --             --             --             --         (1,348)         (1,348)
  Issuance of stock to Employee
    Stock Purchase Plan                       --              8            893             --             --             901
  Exercise of employee incentive
    stock options                             --             --            624             --           (314)            310
  Tax benefit of stock options                --            103             --             --             --             103
  Amortization of restricted stock            --             --             --             --             27              27
  Treasury stock purchases                    --             --         (7,202)            --             --          (7,202)
  Issuance of stock for acquisition           --              5            359             --             --             364
----------------------------------------------------------------------------------------------------------------------------
Balance, November 1, 1997                   $198        $47,376       $ (6,855)       $  (727)       $33,272         $73,264
============================================================================================================================
  Net earnings                                --             --             --             --          6,350           6,350
  Translation adjustments                     --             --             --            708             --             708
  --------------------------------------------------------------------------------------------------------------------------
    Comprehensive income                                                                                               7,058
  Cash dividends                              --             --             --             --         (1,457)         (1,457)
  Issuance of stock to Employee
    Stock Purchase Plan                       --             --             31             --             --              31
  Exercise of employee incentive
    stock options                             --             --            323             --           (217)            106
  Treasury stock purchases                    --             --         (7,473)            --             --          (7,473)
  Issuance of stock for acquisition           --             --            417             --             --             417
----------------------------------------------------------------------------------------------------------------------------
Balance, October 31, 1998                   $198        $47,376       $(13,557)       $   (19)       $37,948         $71,946
============================================================================================================================
  Net earnings                                --             --             --             --            584             584
  Translation adjustments                     --             --             --           (202)            --            (202)
  --------------------------------------------------------------------------------------------------------------------------
    Comprehensive income                                                                                                 382
  Cash dividends                              --             --             --             --           (710)           (710)
  Issuance of stock to Employee
    Stock Purchase Plan                       --             --            574             --           (226)            348
  Exercise of employee incentive
    stock options                             --             --            177             --            (77)            100
  Treasury stock purchases                    --             --         (3,017)            --             --          (3,017)
  Issuance of stock for acquisition           --             --            368             --           (116)            252
----------------------------------------------------------------------------------------------------------------------------
Balance, October 30, 1999                   $198        $47,376       $(15,455)       $  (221)       $37,403         $69,301
============================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>

                                                                21


<PAGE>
<PAGE>
Consolidated Statement of Cash Flows
For the Years Ended October 30, 1999, October 31, 1998, and November 1, 1997

<TABLE>
<CAPTION>
In thousands                                                              1999                 1998                    1997
===========================================================================================================================
<S>                                                                  <C>                   <C>                      <C>
Cash flows from operating activities:
Net earnings                                                         $     584             $  6,350                 $12,634
  Adjustments to reconcile net earnings to cash
  provided by operating activities:
    Depreciation and amortization                                        6,004                3,753                   4,230
    Special and nonrecurring items                                      14,000                3,681                   3,700
    Translation adjustments during year                                   (202)                 708                  (1,001)
    Deferred income tax provision                                       (5,852)               1,768                    (978)
    Minority interest in consolidated subsidiary                           (24)                 (64)                    (47)
    Gain on sale of discontinued operations                                 --                   --                  (6,770)
    Earnings from discontinued operations                                   --                   --                    (938)
    Tax benefit of stock option exercises                                   --                   --                     103
    Compensation expense under stock and option plans                       --                   --                      27
    Change in assets and liabilities:
      Accounts receivable, net                                          (7,595)                (595)                 (3,346)
      Inventories                                                        1,239               (4,695)                 (4,655)
      Prepayments and other current assets                                (106)                 587                    (438)
      Other assets, net                                                 (1,893)              (2,823)                 (1,087)
      Accounts payable and customer deposits                             2,516               (1,845)                  3,264
      Accrued liabilities                                               (3,110)              (6,375)                 (1,337)
      Other liabilities                                                   (605)                (156)                     --
      ---------------------------------------------------------------------------------------------------------------------
      Cash provided by continuing operations                             4,956                  294                   3,361
      Cash provided by (used in) discontinued operations                    --                   --                     (99)
      ---------------------------------------------------------------------------------------------------------------------
      Cash provided by operating activities                              4,956                  294                   3,262
      =====================================================================================================================
Cash flows from investing activities:
  Additions to property, plant and equipment, net                       (6,245)              (6,594)                 (3,807)
  Cost of businesses acquired (including working capital at
    acquisition of $9,596 in 1999 and $564 in 1998)                   (137,101)             (15,962)                     --
  Net proceeds from sale of building                                        --                5,170                      --
  Proceeds from sale of discontinued operations                             --                   --                  17,711
  -------------------------------------------------------------------------------------------------------------------------
      Cash provided by (used in) investing activities                 (143,346)             (17,386)                 13,904
      =====================================================================================================================
Cash flows from financing activities:
  Common stock issuances                                                   700                  137                   1,575
  Treasury stock purchases                                              (3,017)              (7,473)                 (7,202)
  Cash dividends                                                          (710)              (1,457)                 (1,348)
  Additions to long-term debt, net                                     145,691               14,777                     389
  Debt issuance costs                                                   (6,582)                  --                      --
  -------------------------------------------------------------------------------------------------------------------------
      Cash provided by (used in) financing activities                  136,082                5,984                  (6,586)
      =====================================================================================================================
Increase (decrease) in cash and cash equivalents                        (2,308)             (11,108)                 10,580
Cash and cash equivalents - beginning of period                          5,186               16,294                   5,714
---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - end of period                            $   2,878             $  5,186                 $16,294
===========================================================================================================================
Supplemental cash flow information:
  Cash paid for interest                                             $   2,824             $    728                 $    91
  =========================================================================================================================
  Cash paid for taxes                                                $   6,834             $  5,329                 $ 4,841
  =========================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
          22




<PAGE>
<PAGE>
Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies

Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of Falcon Products, Inc. and its subsidiaries (the Company). All
significant intercompany balances and transactions are eliminated in
consolidation.
     The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.

Fiscal Year
The Company's fiscal year ends on the Saturday closest to October 31.
Fiscal years 1999, 1998 and 1997 ended October 30, 1999, October 31,
1998 and November 1, 1997, respectively, and included 52 weeks.
References to years relate to fiscal years rather than calendar years.

Nature of Business
The Company designs, manufactures and markets an extensive line of
furniture and related products for the food service, office,
hospitality, healthcare and retail markets, including table bases, table
tops, metal and wood chairs, booths 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 considers its operations a
single industry segment.
     The Company operates factories in Mexico through wholly owned
subsidiaries which produce all of its table base casting requirements
and also certain of its wood chair frames. Substantially all of the
sales of these subsidiaries are to the parent company and are eliminated
in consolidation. The Company has a manufacturing facility in the Czech
Republic, Falcon Mimon, a.s., which manufactures and sells chair frames
and fully finished wood chairs throughout Europe and in North America.
The Company operates Howe Europe a/s, located in Middelfart, Denmark,
which markets, assembles and distributes tables and chairs to the
European contract/office market. In addition, the Falcon Products
(Shenzen) Limited facility located in The People's Republic of China
manufactures and markets products primarily for the national accounts
market within the Asia Pacific region. Sales from foreign operations and
export sales from domestic facilities were $24.0 million, $13.6 million
and $9.3 million in 1999, 1998 and 1997, respectively.

Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Substantially all of the Company's cash equivalents are denominated in
U.S. dollars and therefore the effect of exchange rate changes on cash
balances was not significant during any of the years presented.

Inventories
Inventories include material, labor and factory overhead and are stated
at the lower of cost or market. The cost of approximately 50% and 0% of
the inventories at October 30, 1999, and October 31, 1998, respectively,
has been determined using the Last-in, First-Out (LIFO) method. The
remaining inventories are valued using the First-In, First-Out (FIFO)
method. At October 30, 1999, the inventory valued using LIFO
approximates FIFO.
     Inventories at October 30, 1999, and October 31, 1998, consist of
the following:

<TABLE>
<CAPTION>
In thousands                                                              1999                 1998
===================================================================================================
<S>                                                                    <C>                  <C>
Raw materials                                                          $28,840              $18,174
Work in process                                                         11,570                5,288
Finished goods                                                           8,668                1,415
---------------------------------------------------------------------------------------------------
                                                                       $49,078              $24,877
===================================================================================================
</TABLE>

Property, Plant and Equipment
Investments in property, plant and equipment are recorded at cost.
Improvements are capitalized, while repair and maintenance costs are
charged to operations. When assets are retired or disposed of, the cost
and accumulated depreciation are removed from the accounts; gains or
losses are included in operations.
     Depreciation, including the amortization of assets recorded under
capital leases, is computed by use of the straight-line method over
estimated service lives. Principal service lives are: buildings and
improvements - 5 to 40 years; machinery and equipment - 3 to 13 years.
     Certain of the Company's assets were acquired through long-term
lease obligations financed principally by Industrial Development Revenue
Bonds. These leases represent installment purchases. Accordingly, the
assets are recorded at cost and the related obligations are included in
long-term obligations as mortgages payable.


<PAGE>
Long-Lived Assets
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," requires that long-lived assets and certain identifiable
intangibles to be held and used or disposed of by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that
the carrying

                                                         23


<PAGE>
<PAGE>
Notes to Consolidated Financial Statements

amount of assets may not be recoverable. The Company periodically
assesses the carrying value of long-lived assets, including intangible
assets, and recognizes impairment losses if it is determined the
carrying values are not recoverable.

Other Assets
Other assets consist of the following at October 30, 1999, and October
31, 1998:

<TABLE>
<CAPTION>
In thousands                                                              1999                 1998
===================================================================================================
<S>                                                                   <C>                   <C>
Goodwill, net of accumulated
  amortization of $3,872 and $2,285                                   $124,381              $23,243
Deferred debt issuance costs,
  net of accumulated amortization
  of $308 and $25                                                        6,318                   19
Deferred catalog costs, net of
  accumulated amortization of
  $17 and $965                                                             697                2,241
Deferred tax asset                                                       2,593                   --
Other, net of accumulated
  amortization of $977 and $1,102                                        4,607                3,146
---------------------------------------------------------------------------------------------------
                                                                      $138,596              $28,649
===================================================================================================
</TABLE>

     Goodwill represents the excess of cost over fair value of net
assets acquired at the date of acquisition. Goodwill is amortized on a
straight-line basis over 30 to 40 years. Deferred debt issuance costs
are amortized on a straight-line basis over the original life of the
respective debt issue, approximately six to 10 years. The cost of the
design, production and distribution of sales catalogs and reprints
thereof is being amortized on a straight-line basis over three to five
years.

Pension Plan
The Company has five noncontributory, defined benefit pension plans
covering certain hourly and substantially all domestic salaried
personnel. The Company's policy is to fund pension benefits to the
extent contributions are deductible for tax purposes and in compliance
with federal laws and regulations.

Foreign Currency Translation
The financial statements of the Company's non-U.S. subsidiaries are
translated into U.S. dollars in accordance with SFAS No. 52, "Foreign
Currency Translation." The functional currency for Falcon Mimon, a.s.
and Howe Europe a/s has been determined to be the subsidiaries' local
currency. As a result, the gain or loss resulting from the translation
of their financial statements to U.S. dollars is included as a separate
component of stockholders' equity.
     For the Company's Mexican subsidiaries, the functional currency
has been determined to be the U.S. dollar. The gain or loss resulting
from the translation of these financial statements is included in
selling, general and administrative expenses.
     The net foreign currency translation and transaction gains
(losses) included in earnings for 1999, 1998 and 1997, were $267, ($737)
and ($304) thousand, respectively.

Interest Rate Hedge Agreement
The Company manages fluctuations in interest rates on borrowings under
its credit facility by using an interest rate swap agreement. The
interest rate swap agreement is accounted for as a hedge of a debt
obligation, and accordingly, the net settlement amount is recorded as an
adjustment to interest expense in the period incurred.
     The Company's interest rate swap agreement provides an effective
ceiling and floor for its floating interest rate and outside this
interest rate range requires the Company to pay a fixed rate and receive
a floating rate thereby creating fixed rate debt. The Company's
participation in interest rate hedging transactions involves instruments
that have a close correlation with its debt, thereby managing risk. The
interest rate swap agreement has been designed for hedging purposes and
is not held or issued for speculative purposes.

Earnings Per Share
Earnings per share amounts have been calculated in accordance with SFAS
No. 128 using the weighted average number of shares outstanding during
each period, adjusted for the impact of common stock equivalents using
the treasury stock method when the effect is dilutive.

Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those reported.


<PAGE>
Comprehensive Income
In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income," which reports
Comprehensive Income and its components within the Statement of
Consolidated Stockholders' Equity. Comprehensive Income represents the
change in stockholders' equity during the period from transactions and
other events and circumstances from nonowner sources. It includes all
changes in equity except those resulting from investments by owners and
distributions to owners.

          24


<PAGE>
<PAGE>

Note 2 - Business Acquisitions

In June 1999, the Company acquired all of the common stock of Shelby
Williams Industries, Inc. and its subsidiaries ("Shelby Williams") for a
cash price of $137.1 million. Shelby Williams is a leading manufacturer
of contract seating for the commercial contract furniture market. The
Company used the purchase method of accounting to record this
acquisition. Accordingly, results of operations have been included in
the financial statements from the date of acquisition. The purchase
price was allocated to the assets and liabilities (on a preliminary
basis) based on estimated fair values at the date of acquisition. This
resulted in an excess of purchase price over assets acquired of $99.2
million, which is being amortized on a straight-line basis over 40
years.
     In March 1998, the Company acquired the stock of Howe Furniture
Corporation and its subsidiaries ("Howe") for $16.6 million, and assumed
$2.2 million of outstanding long-term debt of Howe. Howe specializes in
the design, engineering and marketing of tables for the contract office
and hospitality markets. The Company used the purchase method of
accounting to record this acquisition. Accordingly, results of
operations have been included in the financial statements from the date
of acquisition. The excess of the purchase price over amounts assigned
to net tangible assets ($13.9 million) was recorded as goodwill.
     Following are the Company's unaudited pro forma results, excluding
special and nonrecurring items, assuming the acquisitions occurred on
November 2, 1997:

<TABLE>
<CAPTION>
In thousands, except per-share amounts                                    1999                 1998
===================================================================================================
<S>                                                                   <C>                  <C>
Net sales                                                             $325,814             $307,939
Net earnings                                                             7,356                5,943
Basic and diluted earnings per share                                      0.83                 0.64
===================================================================================================
</TABLE>

     These unaudited pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of
operations that actually would have resulted had the combinations been
in effect on November 2, 1997, or of future results of operations.

Note 3 - Special and Nonrecurring Items

In conjunction with the acquisition of Shelby Williams, the Company
recorded a pre-tax integration charge of $14.0 million, $8.7 million
after taxes or $0.97 per share, to cover the anticipated costs of
combining its existing business with the acquired business. The charge
relates to the closing of certain duplicative manufacturing facilities.
     Included in this charge is $3.5 million to write down the carrying
value of inventory, which is included in Cost of Sales, while the
remaining components are reported in Special and Nonrecurring Items in
the accompanying Consolidated Statements of Earnings. This one-time
charge includes costs associated with asset write-downs, asset
dispositions and other related costs associated with closing the excess
manufacturing facilities of $11.6 million, real estate exit costs of
$1.0 million and severance costs related to the elimination of
approximately 500 positions of $1.4 million. During 1999, the Company
utilized $12.4 million of the charge. At October 30, 1999, the remaining
amount of $1.6 million relates to severance and real estate exit costs
for which payment is anticipated during fiscal year 2000.
     During 1998, the Company recorded a pre-tax charge of $4.7
million, $2.9 million after-tax or $0.32 per share, related to
management's decision to discontinue and dispose of the Company's hotel
casegoods line of business. The charge was substantially all utilized in
1998 and entailed the writedown of assets, including goodwill,
inventories and equipment associated with the product line located in
the Tijuana, Mexico, facility. Of the total charge, Cost of Sales
includes a $3.3 million charge to write down the carrying value of
inventory. The remaining components of the charge have been reported in
Special and Nonrecurring Items in the Consolidated Statements of
Earnings and are related to impairment charges and reserves for losses
on disposal of certain assets and exit costs for lease termination.
     In 1998, the Company also recorded a $1.3 million pre-tax gain,
$0.8 million after-tax or $0.09 per share, on the sale of the Company's
corporate headquarters building during 1998, which is included in
Special and Nonrecurring Items in the accompanying Consolidated
Statements of Earnings. The Company entered into a two-year lease
agreement to lease back a portion of the premises, and accordingly, the
portion of the total $2.5 million gain representing the present value of
the operating lease payments, approximately $1.2 million, was deferred
and is included in other liabilities in the accompanying Consolidated
Balance Sheets. The deferred gain will be credited to income as a
reduction to rent expenses over the term of the lease.
     During the fourth quarter of 1998, the Company recorded an
additional pre-tax charge of $0.2 million, $0.1 million after-tax or
$0.01 per share, related to the consolidation of the Company's
manufacturing facilities that was announced in 1997.

<PAGE>
     During 1997, the Company recorded a pre-tax charge of $3.7
million, $2.3 million after-tax or $0.23 per share, for special and
nonrecurring items. The charges are a result of the consolidation of the
Company's manufacturing operations at its Anaheim, California, and
Belding, Michigan, facilities into its City of Industry, California,
facility and the elimination of several duplicative and nonperforming
wood seating product lines. These pre-tax

                                                         25



<PAGE>
<PAGE>
Notes to Consolidated Financial Statements

charges have been reported in Special and Nonrecurring Items in the
Consolidated Statements of Earnings and included $3.0 million for costs
associated with asset write-downs and dispositions and $0.7 million for
exit costs of leased facilities and employee severance and termination
costs. All items were paid or utilized by the end of 1998.

Note 4 - Discontinued Operations

On September 8, 1997, the Company completed the sale of its William
Hodges division (the Hodges Division) to Leggett & Platt, Incorporated
for approximately $17.7 million. The Hodges Division manufactures wire
shelving and kitchen equipment. The sale resulted in a gain of
approximately $6.8 million, net of applicable income taxes of $3.8
million.
     The results of the Hodges Division for 1997 through the date of
the sale (approximately 10.5 months) are classified as discontinued
operations in the accompanying Consolidated Financial Statements.
Earnings from the discontinued Hodges Division in 1997 were $938,000,
net of applicable income taxes of $575,000. Net revenues from the Hodges
Division in 1997 through the date of the sale were $7.8 million.

Note 5 - Rental Expense and Lease Commitments

The Company leases certain manufacturing facilities and certain office
and transportation equipment under noncancelable lease agreements having
an initial term of more than one year and expiring at various dates
through the year 2006.
     The future minimum rental commitments due under lease agreements
are as follows at October 30, 1999:

<TABLE>
<CAPTION>
                                                                       Capital            Operating
In thousands                                                            Leases               Leases
===================================================================================================
<S>                                                                       <C>               <C>
2000                                                                      $ 61              $ 3,148
2001                                                                        61                2,681
2002                                                                        61                2,065
2003                                                                        61                1,841
2004                                                                        61                1,552
Later years                                                                 --                8,143
---------------------------------------------------------------------------------------------------
Total minimum lease payments                                              $305              $19,430
===================================================================================================
Less amount representing interest                                          (33)
------------------------------------------------------------------------------
Present value of minimum lease payments                                   $272
==============================================================================
</TABLE>

     Total operating lease and rental expense was approximately
$2,432,000, $1,622,000 and $1,463,000 in 1999, 1998 and 1997,
respectively.

Note 6 - Long-Term Debt

Long-term debt consists of the following at October 30, 1999, and
October 31, 1998:

<TABLE>
<CAPTION>
In thousands                                                              1999                 1998
===================================================================================================
<S>                                                                   <C>                  <C>
Term loan expiring April 30, 2005,
  LIBOR + 2.5%                                                        $ 60,000              $    --
11-3/8% senior subordinated notes,
  due June 15, 2009                                                    100,000                   --
Revolving line of credit, interest at
  prime minus 2.0%                                                          --               16,935
Notes payable to a foreign bank,
  secured by certain assets of
  Falcon Mimon, due in varying
  monthly installments, interest
  at LIBOR + 2.5%                                                        2,393                1,559
Notes payable to a foreign bank,
  secured by certain assets of
  Howe Europe, due in varying
  quarterly installments, interest
  at 4.5% to 5.1%                                                        1,841                   --
Obligations under capital leases,
  due in annual installments through
  November 16, 2003, interest at 4.0%                                      272                  321
---------------------------------------------------------------------------------------------------
                                                                       164,506               18,815
Less current maturities                                                  2,443                1,607
---------------------------------------------------------------------------------------------------
                                                                      $162,063              $17,208
===================================================================================================
</TABLE>


<PAGE>
    In June 1999, the Company entered into a new $120.0 million senior
secured credit facility (the "Senior Secured Credit Facility") with a
group of financial institutions that provided for a six-year term loan
of $70.0 million (the "Term Loan") and a six-year revolving credit
facility of up to $50.0 million (the "Revolving Credit Facility"). At
October 30, 1999, the Company had outstanding indebtedness of $60.0
million under the Term Loan, and no amounts were outstanding under the
Revolving Credit Facility.
     The loans outstanding under the Senior Secured Credit Facility
bear interest at the Company's option, at (1) the London Interbank
Offered Rate ("LIBOR") plus the applicable margin, or (2) the greater of
the Prime Rate and the rate which is 1% in excess of the rates on
overnight Federal Funds transactions as published by the Federal Reserve
Bank of New York (the "Base Rate"), plus the applicable margin. The
applicable margin will be determined based on total leverage ratio. For
the Revolving Credit Facility and the Term Loan, the applicable margin
will range from 1.75% to 2.50% for LIBOR borrowings and from 0.75% to
1.50% for Base Rate borrowings.

          26



<PAGE>
<PAGE>

     The Company's Term Loan matures in quarterly installments
beginning July 31, 2000, with $3.0 million due in 2000, $7.5 million in
2001, $10.5 million in 2002, $13.5 million in 2003, $16.5 million in
2004, and $9.0 million in 2005.
     Concurrently with entering into the Senior Secured Credit
Facility, the Company issued $100.0 million of 11-3/8% Senior
Subordinated Notes Series A (the "Series A Notes") due June 15, 2009,
with interest payable semiannually commencing December 15, 1999. The
proceeds from the issuance were used in conjunction with the Senior
Secured Credit Facility to finance the Shelby Williams acquisition along
with the fees and expenses associated with the acquisition. At any time
prior to June 15, 2002, the Company may redeem up to 35% of the
aggregate principal amount at a redemption price of 111.375% of the
principal amount, with the net cash proceeds from public equity
offerings.
     Under the terms of the Senior Secured Credit Facility and the
indentures pursuant to which the Series A Notes have been issued (the
"Indenture"), the Company must comply with certain covenants including
limitations relating to the payment of dividends and the maintenance of
specific ratios.
     Based on borrowing rates currently available for debt instruments
with similar terms and maturities, the fair market value of the
Company's long-term debt as of October 30, 1999, and October 31, 1998,
approximates the debt's carrying value.
     At October 30, 1999, the Company had letters of credit outstanding
of approximately $25,000 relating to insurance reserves and certain
foreign purchases.
     The Company has entered into an interest rate swap agreement with
a notional amount of $35 million. The notional amount of the interest
rate swap does not represent amounts exchanged by the parties and thus,
is not a measure of the Company's exposure through its use of the
interest rate swap agreement. The amounts exchanged are determined by
reference to the notional amount and other terms of the contract.
     Management believes that the seller of the interest rate swap
agreement will be able to meet its obligation under the agreement. The
Company has policies regarding the financial stability and credit
standing of major counterparties. Nonperformance by the counterparty is
not anticipated nor would it have a material adverse effect on the
results of operations or financial position of the Company.

Note 7 - Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes" (SFAS No. 109), which requires income
taxes to be accounted for using a balance sheet approach known as the
liability method. The liability method accounts for deferred income
taxes by applying statutory tax rates in effect at the date of the
balance sheet to differences between the book and tax basis of assets
and liabilities. Adjustments to deferred income taxes resulting from
statutory rate changes flow through the tax provision in the year of the
change.

The components of income tax expense are as follows:

<TABLE>
<CAPTION>

In thousands                                                              1999                 1998                    1997
===========================================================================================================================
<S>                                                                    <C>                   <C>                     <C>
Current:
  Federal                                                              $ 1,755               $1,551                  $3,587
  State                                                                    255                  207                     410
  Foreign                                                                  304                  175                      --
Deferred                                                                (1,441)               1,768                    (978)
---------------------------------------------------------------------------------------------------------------------------
                                                                       $   873               $3,701                  $3,019
===========================================================================================================================
</TABLE>

The following is a reconciliation between statutory federal income tax
expense and actual income tax expense:

<TABLE>
<CAPTION>
In thousands                                                              1999                 1998                    1997
===========================================================================================================================
<S>                                                                      <C>                 <C>                     <C>
Computed "expected"
  federal income
  tax expense                                                            $ 494               $3,417                  $2,701
Increase (decrease)
  resulting from:
    State income taxes                                                      58                  393                     378
    Nondeductible
      goodwill amortization                                                532                  164                      30
    Other, net                                                            (211)                (273)                    (90)
---------------------------------------------------------------------------------------------------------------------------
                                                                         $ 873               $3,701                  $3,019
===========================================================================================================================
</TABLE>


<PAGE>
The significant components of deferred income tax assets and
liabilities are as follows:

<TABLE>
<CAPTION>
In thousands                                                              1999                 1998
===================================================================================================
<S>                                                                    <C>                  <C>
Deferred tax assets:
  Inventories                                                          $ 1,199              $   434
  Reserves and accruals                                                  7,352                  949
  Net operating loss carryforward                                          675                  822
---------------------------------------------------------------------------------------------------
                                                                         9,226                2,205
---------------------------------------------------------------------------------------------------
Deferred tax liabilities:
  Depreciation and other property
    basis differences                                                   (1,718)              (1,153)
  Other                                                                 (2,320)                (158)
---------------------------------------------------------------------------------------------------
                                                                        (4,038)              (1,311)
---------------------------------------------------------------------------------------------------
Net deferred income tax asset                                          $ 5,188              $   894
===================================================================================================
</TABLE>

     Net current deferred income tax assets are included in prepayments
and other current assets in the accompanying Consolidated Balance
Sheets. The Company's net operating loss carryforward expires in 2013.
The Company's income tax returns have been examined by the Internal
Revenue Service for fiscal years through 1994.

                                                       27


<PAGE>
<PAGE>
Notes to Consolidated Financial Statements

Note 8 - Stock Option and Stock Purchase Plans

The Company has an employee incentive stock option plan which allows the
Company to grant key employees incentive and nonqualified stock options
to purchase shares of the Company's common stock at not less than the
market price on the date of grant. Options not exercised accumulate and
are exercisable, in whole or in part, in any subsequent period but not
later than 10 years from the date of grant.
     The Company also has a Non-Employee Director Stock Option Plan,
approved by the stockholders, under which the Company annually grants an
option to purchase 2,000 shares of common stock to each director who is
neither an officer of the Company nor compensated under any employment
or consulting arrangements ("Non-Employee Director"). Under the plan,
the option exercise price is the fair market value of the Company's
common stock on the date of the grant and the options are exercisable,
on a cumulative basis, at 20% per year commencing on the date of the
grant.
     The Non-Employee Director Stock Option Plan was amended in
December 1998 to increase the number of shares underlying the options
granted from 1,650 to 2,000.
     The Company accounts for the option plans using APB Opinion No.
25, "Accounting for Stock Issued to Employees." Accordingly, no
compensation expense has been recognized relating to the stock options.

Stock option transactions under the plans for 1999, 1998, and 1997 are
summarized below:

<TABLE>
<CAPTION>
                                                  1999                          1998                          1997
                                         ----------------------        ----------------------        ----------------------
                                         Average         Number        Average         Number        Average         Number
                                           Price      Of Shares          Price      Of Shares          Price      Of Shares
===========================================================================================================================
<S>                                       <C>         <C>               <C>           <C>             <C>           <C>
Options outstanding at beginning of year  $11.66        870,848         $10.70        687,892         $ 9.35        575,925
Options granted                           $10.52        567,000         $14.07        242,550         $14.49        168,900
Options canceled                          $12.45        135,839         $13.55         37,791         $13.16         12,754
Options exercised                         $ 8.03         12,039         $ 4.88         21,803         $ 7.01         44,179
---------------------------------------------------------------------------------------------------------------------------
Options outstanding at end of year        $11.09      1,289,970         $11.66        870,848         $10.70        687,892
---------------------------------------------------------------------------------------------------------------------------
Exercisable at end of year                              530,340                       447,663                       311,847
===========================================================================================================================
</TABLE>

Stock options outstanding at October 30, 1999:

<TABLE>
<CAPTION>
                                              Options Outstanding                                   Options Exercisable
                                ----------------------------------------------                 ----------------------------
                                    Number         Remaining  Weighted Average                     Number  Weighted Average
Range of Exercise               of Options  Contractual Life    Exercise Price                 of Options    Exercise Price
===========================================================================================================================
<S>                              <C>                     <C>            <C>                       <C>                <C>
$ 0.60 - $9.77                     541,420               5.9            $ 9.00                    329,090            $ 9.07
$10.00 - $12.88                    430,200               8.1            $11.38                     93,670            $10.81
$13.13 - $15.00                    318,350               7.7            $14.26                    107,580            $14.27
---------------------------------------------------------------------------------------------------------------------------
                                 1,289,970               7.1            $11.09                    530,340            $10.44
===========================================================================================================================
</TABLE>

     Pro forma net earnings and net earnings per common share in the
following table were prepared as if the Company had accounted for its
stock option plans under the fair market value method of SFAS No. 123,
"Accounting for Stock-Based Compensation."

<TABLE>
<CAPTION>
                                      1999              1998              1997
==============================================================================
<S>                                  <C>              <C>              <C>
Net earnings-pro forma
  (in thousands)                       $55            $6,127           $12,446
Net earnings per share-
  pro forma                          $0.01             $0.66             $1.26
Weighted average fair value
  of options granted                 $3.07             $6.64             $7.39
==============================================================================
</TABLE>

     For the pro forma disclosures, the fair value of each option grant
is estimated at the date of the grant using an option pricing model with
the following assumptions:


<PAGE>
<TABLE>
<CAPTION>
                                      1999              1998              1997
==============================================================================
<S>                              <C>                <C>               <C>
Expected dividend yield                  1%                1%               .7%
Expected stock price volatility         30%               30%               30%
Risk-free interest rate                5.2%              5.8%              6.4%
Expected life of option          6.2 years          10 years          10 years
==============================================================================
</TABLE>

     In 1998, the Company adopted an Employee Stock Purchase Plan.
Under the Employee Stock Purchase Plan, employees may contribute up to
10% of their gross income to purchase stock of the Company at 85% of the
lesser of the fair market value on the grant date or the exercise date.

            28


<PAGE>
<PAGE>
     During 1997, the Company had a Stock Purchase Plan under which
eligible employees could elect to invest up to 10% of salary earned
during each pay period and the Company contributed an amount equal to
40% of each participant's contributions. This plan was terminated at the
end of fiscal 1997.

Note 9 - Earnings Per Share

In accordance with SFAS No. 128, the following table reconciles net
earnings and weighted average shares outstanding to the amounts used to
calculate basic and diluted earnings per share for each of the years
ended 1999, 1998 and 1997.

<TABLE>
<CAPTION>
In thousands,
except per-share data                 1999              1998              1997
==============================================================================
<S>                                  <C>              <C>               <C>
Net earnings                          $584            $6,350            $4,926
==============================================================================
Average shares outstanding           8,825             9,156             9,665
Assumed exercise of
  options (treasury method)             53               126               211
------------------------------------------------------------------------------
Average shares outstanding
  adjusted for
  dilutive effects                   8,878             9,282             9,876
==============================================================================
Basic earnings per share             $0.07             $0.69             $0.51
==============================================================================
Diluted earnings per share           $0.07             $0.68             $0.50
==============================================================================
</TABLE>

     Basic earnings per share was computed by dividing earnings
available to common stockholders by the weighted average shares of
common stock outstanding during the year. Diluted earnings available to
common stockholders was determined assuming the options issued and
outstanding were exercised as of the first day of the respective year of
the grant date. Options to purchase 748,550 shares at a weighted average
exercise price of $12.61 per share, 386,850 shares at a weighted average
exercise price of $14.23 per share and 155,400 shares at a weighted
average exercise price of $14.51 were outstanding during 1999, 1998 and
1997, respectively, but were not included in the computation of diluted
earnings per share because the exercise price was greater than the
average market price of the common stock.

Note 10 - Pension Plans

The Company has five noncontributory, defined benefit pension plans
covering certain hourly and substantially all salaried domestic
personnel. For the Company's plans, normal retirement age is 65, but
provision is made for earlier retirement. Benefits are based on 1.5% of
average annual compensation for each year of service. Full vesting
occurs upon completion of five years of service. Assets of the Company's
pension plans primarily consist of investments in publicly traded
securities and in group annuity contracts with insurance companies.
     The following actuarial assumptions were used in determining the
Company's net periodic pension cost and projected benefit obligation:

<TABLE>
<CAPTION>
                                                                         1999           1998
============================================================================================
<S>                                                                      <C>            <C>
Discount rate                                                            7.50%          7.25%
Rate of salary increase                                                  5.00%          5.00%
Expected long-term rate
  of return on plan assets                                               9.00%          9.00%
============================================================================================
</TABLE>


<PAGE>
Net periodic pension cost of the plan is as follows:

<TABLE>
<CAPTION>
In thousands                                                              1999           1998
=============================================================================================
<S>                                                                    <C>            <C>
Change in benefit obligation
Benefit obligation at beginning of year                                $ 6,621        $ 6,780
Service cost                                                               718            619
Interest cost                                                              458            522
Actuarial (gain) loss                                                     (642)           619
Acquisition                                                             24,518              0
Benefits paid                                                             (683)        (1,919)
---------------------------------------------------------------------------------------------
Benefit obligation at end of year                                      $30,990        $ 6,621
=============================================================================================
Change in plan assets
Fair value of plan assets at beginning of year                         $ 5,856        $ 6,289
Actual return on plan assets                                               392            540
Acquisition                                                             23,312              0
Employer contributions                                                   1,408            946
Benefits paid                                                             (683)        (1,919)
---------------------------------------------------------------------------------------------
Fair value of plan assets at end of year                               $30,285        $ 5,856
=============================================================================================
Reconciliation of funded status
Funded status (underfunded)/overfunded                                 $  (705)       $  (765)
Unrecognized net actuarial (gain)/loss                                     361            676
Unrecognized transition (asset)/obligation                                  (8)           (49)
Unrecognized prior service cost                                            441            513
---------------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost                                         $    89        $   375
=============================================================================================
Components of net periodic benefit cost
Service cost                                                           $   718        $   619
Interest cost                                                              458            427
Expected return on plan assets                                            (492)          (495)
Amortization of plan assets                                                 16              0
Amortization of prior service cost                                          72             72
Amortization of transition (asset)/obligation                              (41)           (40)
Recognized net actuarial loss/(gain)                                       (11)             0
---------------------------------------------------------------------------------------------
Net periodic benefit cost                                              $   720        $   583
=============================================================================================
</TABLE>

Note 11 - Business Segment Information

The Company operates in one product business segment, the manufacturing
and sale of commercial contract furniture. Additionally, the Company's
operations are located worldwide and are analyzed on a consolidated
basis.

                                                         29



<PAGE>
<PAGE>

Notes to Consolidated Financial Statements

Note 12 - Transactions with Related Parties

Certain of the Company's directors or their affiliates provide various
consulting and other professional services to the Company or purchase
some of the Company's products. During 1999, 1998 and 1997, the Company
incurred expenses of approximately $874,000, $222,000 and $99,000,
respectively, for such services.

Note 13 - Contingencies

The Company is subject to various lawsuits and claims with respect to
such matters as patents, product liabilities, government regulations,
and other actions arising in the normal course of business. In the
opinion of management, the ultimate liabilities resulting from such
lawsuits and claims will not have a material adverse effect on the
Company's financial condition and results of operations.

Note 14 - Quarterly Financial Information (Unaudited)

<TABLE>
<CAPTION>
In thousands, except per-share data
===========================================================================================================================
1999                                                                     First         Second          Third         Fourth
===========================================================================================================================
<S>                                                                    <C>            <C>            <C>            <C>
Net sales                                                              $34,595        $36,469        $59,884        $91,547
Special and nonrecurring items                                              --             --         10,500             --
Gross margin                                                             9,902         10,672          2,817         24,612
Net earnings (loss)                                                      1,864          1,970         (6,229)         2,979
Earnings per share:
  Diluted earnings (loss) per share                                    $  0.21        $  0.23        $ (0.71)       $  0.34
===========================================================================================================================

<CAPTION>
===========================================================================================================================
1998                                                                     First         Second          Third         Fourth
===========================================================================================================================
<S>                                                                    <C>            <C>            <C>            <C>
Net sales                                                              $28,060        $33,651        $41,297        $40,418
Special and nonrecurring items                                              --             --            111            160
Gross margin                                                             8,134          9,525          9,113         13,316
Net earnings                                                             1,782          1,838            216          2,514
Earnings per share:
  Diluted earnings (loss) per share                                    $  0.19        $  0.20        $  0.02        $  0.28
===========================================================================================================================
</TABLE>

          30



<PAGE>
<PAGE>

Report of Independent Public Accountants

To Falcon Products, Inc.:
We have audited the accompanying consolidated balance sheets of FALCON
PRODUCTS, INC. (a Delaware corporation) and subsidiaries as of October
30, 1999, and October 31, 1998, and the related consolidated statements
of earnings, stockholders' equity and cash flows for each of the three
fiscal years in the period ended October 30, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
     We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
     In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Falcon
Products, Inc. and subsidiaries as of October 30, 1999, and October 31,
1998, and the results of their operations and their cash flows for each
of the three fiscal years in the period ended October 30, 1999, in
conformity with generally accepted accounting principles.



ARTHUR ANDERSEN LLP
St. Louis, Missouri
December 15, 1999

                                                          31

<PAGE>
<PAGE>
Selected Financial Data

<TABLE>
<CAPTION>
In thousands, except per-share amounts                  1999        1998        1997        1996        1995        1994
========================================================================================================================
<S>                                                 <C>         <C>         <C>         <C>          <C>         <C>
Operating Data:
Net sales                                           $222,495    $143,426    $113,010    $100,702     $79,647     $67,957
Cost of sales, including nonrecurring items          163,992     103,067      79,507      69,125      52,883      45,318
Special and nonrecurring items                        10,500         271       3,700          --          --          --
------------------------------------------------------------------------------------------------------------------------
Gross margin                                          48,003      40,088      29,803      31,577      26,764      22,639
Selling, general and administrative expenses          39,289      29,482      22,044      20,469      16,992      14,354
------------------------------------------------------------------------------------------------------------------------
Operating profit                                       8,714      10,606       7,759      11,108       9,772       8,285
Interest expense (income), net                         7,281         619        (139)        (95)       (141)       (145)
Minority interest                                         24          64          47          89         (44)          4
------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations
  before income taxes                                  1,457      10,051       7,945      11,292       9,869       8,434
Income tax expense                                       873       3,701       3,019       4,291       3,693       3,121
------------------------------------------------------------------------------------------------------------------------
Net earnings from continuing operations                  584       6,350       4,926       7,001       6,176       5,313
Discontinued operations, net of tax                       --          --         938       1,432       1,281         864
Gain on sale of discontinued operations, net of tax       --          --       6,770          --          --          --
------------------------------------------------------------------------------------------------------------------------
Net earnings                                        $    584    $  6,350    $ 12,634    $  8,433     $ 7,457     $ 6,177
========================================================================================================================

Earnings per share - Diluted:<F1>
Continuing operations                               $   0.07    $   0.68    $   0.50    $   0.71     $  0.64     $  0.55
Discontinued operations                                   --          --        0.09        0.15        0.13        0.09
Gain on sale of discontinued operations                   --          --        0.69          --          --          --
------------------------------------------------------------------------------------------------------------------------
Net earnings per share                              $   0.07    $   0.68    $   1.28    $   0.86     $  0.77     $  0.64
========================================================================================================================
Cash dividends per share                            $   0.08    $   0.16    $   0.14    $   0.10     $  0.07     $  0.04
========================================================================================================================

Financial Position:
Working capital                                     $ 46,799    $ 35,756    $ 38,691    $ 34,531     $29,927     $25,658
Property, plant and equipment, net                    48,841      27,498      25,211      24,485      21,529      18,467
Capital expenditures                                   6,245       6,594       3,807       4,449       4,969       4,608
Total assets                                         292,206     111,974      99,357      84,388      74,884      64,905
Total debt                                           164,506      18,815       1,794       1,405       1,889       1,787
Stockholders' equity                                  69,301      71,946      73,264      68,476      58,307      50,556
========================================================================================================================
<FN>
<F1>Per-share data reflects adjustments related to the December 1995,
    10% stock dividend.
</TABLE>
          32




<PAGE>
<PAGE>
Board of Directors

Franklin A. Jacobs <F*>
Chairman of the Board and
Chief Executive Officer
Falcon Products, Inc.

Raynor E. Baldwin <F+>
President
Woodsmiths, Inc.

Melvin F. Brown <F+>
Chairman Emeritus
Deutsche Financial Services

Donald P. Gallop <F*>
Chairman
Gallop, Johnson & Neuman, L.C.
Attorneys At Law

James L. Hoagland
Retired, Past President and
Chief Executive Officer
Graybar Electric Company, Inc.

S. Lee Kling <F*>
Chairman of the Board
Kling Rechter & Co., Inc.

Lee M. Liberman <F+>
Retired, Past Chairman of
the Board
Laclede Gas Company

Darryl C. Rosser
President and
Chief Operating Officer
Falcon Products, Inc.

James Schneider
Broker
International Monetary Market
Chicago Mercantile Exchange

[FN]
<F*> Member Executive Committee
<F+> Member Audit Committee

Form 10-K

A copy of the Annual Report to the Securities and Exchange Commission on
Form 10-K may be obtained from the Company at no charge.

Direct your requests to:
Corporate Secretary
Falcon Products, Inc.
9387 Dielman Industrial Drive
St. Louis, Missouri 63132

Trading Information

Falcon Products, Inc., common stock is traded on the New York Stock
Exchange, Symbol: FCP

Corporate Officers

Franklin A. Jacobs
Chairman of the Board and
Chief Executive Officer

Darryl C. Rosser
President and
Chief Operating Officer

R. Scott Boyd
Vice President, Hospitality

Stephen E. Cohen
Vice President, Sales and Marketing

John K. Cronin
Vice President, Contract

Robert P. Coulter
President and
Chief Operating Officer,
Shelby Williams Industries, Inc.

Michael J. Dreller
Vice President, Finance and Chief Financial Officer

Lynda Garrison
Vice President, Support Services and Systems Development

Richard Hnatek
Senior Vice President, Quality


<PAGE>
Michael Jacobs
Vice President, International

Michael J. Kula
Vice President, Corporate Technology and Development

Michael Moore
Vice President Sales,
Shelby Williams Industries, Inc.

Charles A. Pineau
Vice President, Human Resources

Jackson H. Spidell
Vice President, Operations

Annual Meeting

The Annual Meeting of Stockholders will be held Thursday, March 16,
2000, at 4:00 p.m. at the St. Louis Club, 16th Floor, 7701 Forsyth Blvd.
Clayton, Missouri 63105

Facilities

Corporate Headquarters
Falcon Products, Inc.
9387 Dielman Industrial Drive
St. Louis, Missouri 63132
www.falconproducts.com

Falcon de Juarez, S.A. de C.V.
APDO, Postal 2519 E.
CD Juarez, Chih., Mexico
U.S.A. - P.O. Box 12865

Falcon Mimon, a.s.
Hvezdovska 644
47124 Mimon
Czech Republic

Falcon Products
(Shenzhen) Limited
Pin Hu Cun, Pin Hu Zheng
Shenzhen
The People's Republic of China
518111

Howe Europe a/s
Fabriksvej 15c Roejle
5500 Middelfart, Denmark

Falcon/Belmont
22 Falcon Drive
Belmont, Mississippi 38827

Falcon/City of Industry
16040 Stephens Street
City of Industry, California 91745

Falcon/Newport
810 West Highway 25/70
Newport, Tennessee 37821

Shelby Williams/Morristown
150 Shelby Williams Drive
Morristown, Tennessee 37813

Industrial Mueblera Shelby Williams, S.A. DE C.V.
Manzana IV, Lote 1, Parque Industrial Calera DE V.R. 98500
Calera, Zacatecas, Mexico

King Arthur
603 Meacham Road
Statesville, North Carolina 28677

Sellers & Josephson
86 Route 4 East
Englewood, New Jersey 07631

Sellers & Josephson
50 Amor Avenue
Carlstadt, New Jersey 07072

Thonet
2075 Highway 43
Canton, Mississippi 39046

Chicago Showrooms
11-111 and
1169 Merchandise Mart
Chicago, Illinois 60654

California Showroom
8687 Melrose Avenue
Los Angeles, California 90069


<PAGE>
Atlanta Showroom
#5 Piedmont Center
3525 Piedmont Road North East
Suite #100
Atlanta, Georgia 30305

Dallas Showroom
1444 Oak Lawn Avenue
Suite 612
Dallas, Texas 75207

Florida Showroom
8211 West Brownard Boulevard
Suite 120
Plantation, Florida 33324

Houston Sales Office
7026 Old Katy Road
Suite 267
Houston, Texas 77024

New York Sales Office
A&D Building Suite 300
150 East 58th Street
New York, New York 10005

Transfer Agent

Registrar & Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
800-368-5948

Independant
Public Accountants

Arthur Andersen LLP
1010 Market Street
St. Louis, Missouri 63101

Corporate Counsel

Gallop, Johnson & Neuman, L.C.
101 South Hanley Road
St. Louis, Missouri 63105