Furniture Brands Intl. Announces Third Q ResultsST. LOUIS, MO -- Furniture Brands International today announced financial results for the third quarter ended Sept. 30, 2011.

  • Sales declined 5.1% to $258 million as compared to $272 million reported in the third quarter of 2010
     
  • Cost reduction actions implemented with anticipated future annualized cost savings in excess of $30 million and associated charges of $7.5 million
     
  • Total liquidity of $60.5 million at quarter end, comprised of an ending cash balance of $21.2 million and bank facility additional borrowing availability of $39.3 million

Ralph Scozzafava, chairman and CEO stated, "We operate in a discretionary category and the macro headwinds have had an impact on our operating environment, affecting the buying behavior of our target customers. Our focus has been, and continues to be, on controlling our controllables. We cannot, and will not, simply wait for an economic recovery. We have to be proactive in further strengthening our competitive position and improving our cost structure."

Scozzafava said, "Our decisions to increase our competitiveness with initiatives like compelling new product introductions at the recent High Point Market and strategic investments in our infrastructure, including the ongoing implementation of SAP and the addition of our low-cost plants in Indonesia and Mexico, will better position us for the future. While these decisions are straightforward and relatively easy to make, cost reduction decisions are extremely difficult, but necessary to support our company's investment in important capabilities and improve our overall cost structure. The cost improvement actions we are executing will result in ongoing annualized cost savings in excess of $30 million and will better position our Company for the future."

Net sales of $258 million for the third quarter of 2011 decreased 5.1% versus net sales of $272 million in the third quarter of 2010. Third quarter 2011 retail sales at the 67 company-owned stores and showrooms totaled $35.9 million, down 2.6% compared with third-quarter 2010 sales at 70 company-owned stores and showrooms. Third-quarter 2011 same-store sales at the 45 Thomasville stores that the company has owned and operated for more than 15 months showed an increase of 5% compared to the third quarter of 2010 when same store sales increased 22%. This represents the seventh consecutive quarter of Thomasville same store sales growth.

Furniture Brands' gross margin for the third quarter of 2011 was 22.3% including a $2.8 million charge associated with the cost reduction initiatives, compared with 24.8% in the third quarter of 2010. Excluding the $2.8 million charge, the decline in gross margin in the third quarter of 2011 as compared to the third quarter of 2010 was largely driven by a timing difference between raw material cost increases and the initiatives put in place to mitigate their impact.

Selling, general and administrative expenses (SG&A) for the third quarter of 2011 totaled $75 million as compared to $70.7 million in the third quarter of 2010. SG&A in the third quarter of 2011 includes a $4.7 million charge associated with the cost reduction actions.

The Company had a pretax loss of $27.3 million in the third quarter of 2011 as compared to a pretax loss of $4.5 million in the third quarter of 2010. The third quarter 2011 pre-tax loss includes the charges described above totaling $7.5 million, as well as a $9 million intangible impairment charge.   

For the third quarter of 2011, Furniture Brands had a net loss of $24.5 million, or $0.45 per share compared to a net loss of $2.1 million, or $0.04 per share in the third quarter of 2010. The third quarter 2011 operating loss includes $16.5 million ($13.4 million after-tax, or $0.24 per share) in charges for cost reduction actions and intangible impairments. 

The Company ended the quarter with $21.2 million in cash and $39.3 million in bank facility borrowing availability for total liquidity of $60.5 million. Shortly after the quarter ended we completed the sale of our Morganton facility resulting in proceeds of $5.9 million. Our final 2011 pension contribution of $2.5 million was also made in cash after the quarter ended.

"2011 has been an investment year as our cost reduction actions have been accompanied by investment initiatives that strengthen our Company and help drive profitable sales," Scozzafava said. "As we look to 2012, we expect to have positive free cash flow, largely driven by improved operating performance and a return of capital expenditures to more normalized levels, as much of our investment spend is behind us. The entire Furniture Brands organization is focused on driving sales by developing compelling product at an attractive value, consistently improving our cost structure and efficiencies, prudently allocating capital and most importantly, progressing towards profitability," Mr. Scozzafava concluded.

About Furniture Brands

Furniture Brands International is one of the world's leading designers, manufacturers, sourcers, wholesalers, and retailers of home furnishings. We market through a wide range of retail channels, from mass merchant stores to single-branded and independent dealers to specialized interior designers. We serve our customers through some of the best known and most respected brands in the furniture industry, including Broyhill, Lane, Thomasville, Drexel Heritage, Henredon, Hickory Chair, Pearson, Laneventure, Maitland-Smith, and Creative Interiors.

FURNITURE BRANDS INTERNATIONAL, INC. 

 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

 (in thousands except per share data) 

 (unaudited) 

 

 

 

 

 

 

 Three Months Ended 

 Nine Months Ended 

 

 September 30, 

 September 30, 

 September 30, 

 September 30, 

 

 2011 

 2010 

 2011 

 2010 

 Net sales 

 $ 258,047

 $ 271,987

 $ 852,128

 $ 883,841

 Cost of sales 

 200,506

 204,592

 643,623

 657,606

 Gross profit 

 57,541

 67,395

 208,505

 226,235

 Selling, general & administrative expenses 

 74,995

 70,721

 233,849

 225,751

 Impairment of trade names 

 9,000

 -- 

 9,000

 -- 

 Operating earnings (loss) 

 (26,454)

 (3,326)

 (34,344)

 484

 Interest expense 

 862

 789

 2,581

 2,367

 Other income (expense), net 

 23

 (395)

 918

 346

 Loss before income tax benefit 

 (27,293)

 (4,510)

 (36,007)

 (1,537)

 Income tax benefit 

 (2,747)

 (2,416)

 (1,754)

 (7,188)

 Net earnings (loss) 

 $ (24,546)

 $ (2,094)

 $ (34,253)

 $ 5,651

 

 

 

 

 

 Net earnings (loss) per common share: 

 

 

 

 

 Basic and diluted 

 $ (0.45)

 $ (0.04)

 $ (0.62)

 $ 0.11

 

 

 

 

 

 Weighted average common shares outstanding: 

 

 

 

 

 Basic 

 54,990

 51,927

 54,909

 49,871

 Diluted 

 54,990

 51,927

 54,909

 49,887

 

 

FURNITURE BRANDS INTERNATIONAL, INC. 

 CONDENSED CONSOLIDATED BALANCE SHEETS 

 (in thousands) 

 (unaudited) 

 

 

 

 

 September 30, 

 December 31, 

 

 2011 

 2010 

 ASSETS 

 

 

 

 

 

 Current assets: 

 

 

 Cash and cash equivalents 

 $ 21,191

 $ 51,964

 Receivables, less allowances of $8,628 

 

 

  ($18,076 at December 31, 2010) 

 109,616

 114,535

 Inventories 

 248,879

 249,691

 Prepaid expenses and other current assets 

 10,603

 11,242

 Total current assets 

 390,289

 427,432

 

 

 

 Property, plant and equipment, net 

 117,529

 124,866

 Trade names 

 77,508

 86,508

 Other assets 

 54,315

 37,607

 

 $ 639,641

 $ 676,413

 

 

 

 LIABILITIES AND SHAREHOLDERS' EQUITY 

 

 

 

 

 

 Current liabilities: 

 

 

 Accounts payable 

 $ 84,034

 $ 79,846

 Accrued expenses 

 60,670

 61,223

 Total current liabilities 

 144,704

 141,069

 

 

 

 Long-term debt 

 77,000

 77,000

 Deferred income taxes 

 18,976

 23,114

 Pension liability 

 100,882

 104,736

 Other long-term liabilities 

 67,554

 70,927

 

 

 

 Shareholders' equity 

 230,525

 259,567

 

 $ 639,641

 $ 676,413

 

 

 

 FURNITURE BRANDS INTERNATIONAL, INC. 

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

 (in thousands) 

 (unaudited) 

 

 

 

 

 Nine Months Ended 

 

 September 30, 

 September 30, 

 

 2011 

 2010 

 Cash flows from operating activities: 

 

 

 Net earnings (loss) 

 $ (34,253)

 $ 5,651

 Adjustments to reconcile net earnings (loss) to net cash 

 

 

 provided (used) by operating activities: 

 

 

 Depreciation and amortization 

 16,726

 17,540

 Compensation expense related to stock option 

 

 

 grants and restricted stock awards 

 1,832

 1,816

 Impairment of trade names 

 9,000

 -- 

 Other, net 

 (782)

 (591)

 Changes in operating assets and liabilities: 

 

 

 Accounts receivable 

 4,437

 7,206

 Income taxes receivable 

 482

 51,993

 Inventories 

 812

 (50,392)

 Prepaid expenses and other assets 

 754

 (2,006)

 Accounts payable and other accrued expenses 

 2,361

 (3,040)

 Deferred income taxes 

 (2,863)

 (3,018)

 Other long-term liabilities 

 (5,994)

 (6,922)

 Net cash provided (used) by operating activities 

 (7,488)

 18,237

 

 

 

 Cash flows from investing activities: 

 

 

 Additions to property, plant, equipment and software 

 (24,049)

 (16,190)

 Proceeds from the disposal of assets 

 3,119

 2,338

 Net cash used in investing activities 

 (20,930)

 (13,852)

 

 

 

 Cash flows from financing activities: 

 

 

 Payments of long-term debt 

 -- 

 (18,000)

 Payments for debt issuance costs 

 (2,423)

 -- 

 Other 

 68

 (68)

 Net cash used in financing activities 

 (2,355)

 (18,068)

 

 

 

 Net decrease in cash and cash equivalents 

 (30,773)

 (13,683)

 Cash and cash equivalents at beginning of period 

 51,964

 83,872

 Cash and cash equivalents at end of period 

 $ 21,191

 $ 70,189

 

 

 

 

 

 

 Supplemental disclosure: 

 

 

 Cash payments (refunds) for income taxes, net 

 $ 340

 $ (56,561)

 

 

 

 Cash payments for interest expense 

 $ 2,223

 $ 2,177

 

 FURNITURE BRANDS INTERNATIONAL, INC. 

 SUPPLEMENTAL RETAIL INFORMATION 

 (dollars in thousands) 

 (unaudited) 

 

 

 

 

 

 

 Thomasville Stores (a) 

 All Other Retail Locations (b) 

 

 Three Months Ended 

 Three Months Ended 

 

 September 30, 

 September 30, 

 September 30, 

 September 30, 

 

 2011 

 2010 

 2011 

 2010 

 Net sales 

 $ 26,668

 $ 26,965

 $ 9,258

 $ 9,937

 Cost of sales 

 15,249

 16,430

 6,220

 6,174

 Gross profit 

 11,419

 10,535

 3,038

 3,763

 Selling, general & administrative expenses - open stores 

 15,275

 15,284

 4,336

 5,278

 Operating loss - open stores (c) 

 (3,856)

 (4,749)

 (1,298)

 (1,515)

 

 

 

 

 

 Selling, general & administrative expenses - closed stores 

 -- 

 -- 

 2,831

 1,610

 Operating loss (c) 

 $ (3,856)

 $ (4,749)

 $ (4,129)

 $ (3,125)

 

 

 

 

 

 

 

 

 

 

 Number of open stores and showrooms at end of period 

 49

 51

 18

 19

 Number of closed locations at end of period 

 

 

 26

 26

 

 

 

 

 

 Same-store-sales (d): 

 

 

 

 

 Percentage increase 

 5

 22

 (e) 

 (e) 

 Number of stores 

 45

 42

 

 

 

 

 

 

 

 

 

 

 

 

 

 Nine Months Ended 

 Nine Months Ended 

 

 September 30, 

 September 30, 

 September 30, 

 September 30, 

 

 2011 

 2010 

 2011 

 2010 

 Net sales 

 $ 82,520

 $ 78,974

 $ 28,821

 $ 29,969

 Cost of sales 

 48,383

 45,872

 18,624

 18,532

 Gross profit 

 34,137

 33,102

 10,197

 11,437

 Selling, general & administrative expenses - open stores 

 47,255

 46,361

 14,502

 16,716

 Operating loss - open stores (c) 

 (13,118)

 (13,259)

 (4,305)

 (5,279)

 

 

 

 

 

 Selling, general & administrative expenses - closed stores 

 -- 

 -- 

 5,096

 3,530

 Operating loss (c) 

 $ (13,118)

 $ (13,259)

 $ (9,401)

 $ (8,809)

 

 

 

 

 

 

 

 

 

 

 Same-store-sales (d): 

 

 

 

 

 Percentage increase 

 10

 21

 (e) 

 (e) 

 Number of stores 

 48

 42

 

 

 

 

 

 

 

 Source: Furniture Brands International, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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