FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996 or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------ -------------
Commission file number I-91
----
Furniture Brands International, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 43-0337683
------------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 South Hanley Road, St. Louis, Missouri 63105
--------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 863-1100
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-----------------------------------------------------------------
Former name, former address and former fiscal year, if changed
since last report
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes X No
-------- --------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes X No
----------- -----------
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
61,400,945 Shares as of July 31, 1996
-------------------------------------
<PAGE>
PART I FINANCIAL INFORMATION
----------------------------
Item 1. Financial Statements
Consolidated Financial Statements for the quarter ended June 30,
1996.
Consolidated Balance Sheets
Consolidated Statements of Operations:
Three Months Ended June 30, 1996
Three Months Ended June 30, 1995
Six Months Ended June 30, 1996
Six Months Ended June 30, 1995
Consolidated Statements of Cash Flows:
Six Months Ended June 30, 1996
Six Months Ended June 30, 1995
Notes to Consolidated Financial Statements
Separate financial statements and other disclosures with respect
to the Company's subsidiaries are omitted as such separate
financial statements and other disclosures are not deemed
material to investors.
The financial statements are unaudited, but include all
adjustments (consisting of normal recurring adjustments) which
the management of the Company considers necessary for a fair
presentation of the results of the period. The results for the
three months and six months ended June 30, 1996 are not
necessarily indicative of the results to be expected for the full
year.<PAGE>
[CAPTION]
<TABLE>
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<C> <C>
June 30, December 31,
1996 1995
ASSETS ----------- -----------
Current assets:
Cash and cash equivalents....................... $ 18,525 $ 26,412
Receivables, less allowances of $23,517
($20,724 at December 31, 1995)................ 287,569 276,116
Inventories...........................(Note 1).. 276,406 269,677
Prepaid expenses and other current assets....... 19,818 17,888
----------- -----------
Total current assets.......................... 602,318 590,093
----------- -----------
Property, plant and equipment..................... 402,113 389,429
Less accumulated depreciation................... 104,656 83,023
----------- -----------
Net property, plant and equipment............. 297,457 306,406
----------- -----------
Intangible assets, net............................ 348,578 370,307
Other assets...................................... 21,980 24,933
----------- -----------
$ 1,270,333 $ 1,291,739
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt............ $ 21,173 $ 18,639
Accrued interest expense........................ 3,032 1,304
Accounts payable and other accrued expenses..... 135,997 115,114
----------- -----------
Total current liabilities..................... 160,202 135,057
----------- -----------
Long-term debt, less current maturities.(Note 2).. 562,795 705,040
Other long-term liabilities....................... 132,842 150,486
Shareholders' equity:
Preferred stock, authorized 10,000,000
shares, no par value - issued none............ - -
Common stock, authorized 100,000,000 shares,
$1.00 stated value - issued 61,398,952
shares at June 30, 1996 and 50,120,079
shares at December 31, 1995.........(Note 2).. 61,399 50,120
Paid-in capital................................. 297,761 218,156
Retained earnings............................... 55,334 32,880
----------- -----------
Total shareholders' equity.................... 414,494 301,156
----------- -----------
$ 1,270,333 $ 1,291,739
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
(Unaudited)
<C> <C>
Three Months Three Months
Ended Ended
June 30, June 30,
1996 1995
------------ ------------
Net sales...................................... $ 420,742 $ 250,336
Costs and expenses:
Cost of operations........................... 302,657 176,895
Selling, general and administrative expenses. 74,568 47,830
Depreciation and amortization................ 13,880 9,500
------------ ------------
Earnings from operations....................... 29,637 16,111
Interest expense............................... 11,365 8,434
Other income, net.............................. 665 1,597
------------ ------------
Earnings before income tax expense............. 18,937 9,274
Income tax expense............................. 7,316 3,787
------------ ------------
Net earnings................................... $ 11,621 $ 5,487
============ ============
Net earnings per common share:
Primary...................................... $ 0.18 $ 0.11
====== ======
Fully diluted................................ $ 0.18 $ 0.11
====== ======
Weighted average common and common
equivalent shares outstanding:
Primary...................................... 63,703,924 50,594,863
============ ============
Fully diluted................................ 64,019,160 50,639,977
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
(Unaudited)
<C> <C>
Six Months Six Months
Ended Ended
June 30, June 30,
1996 1995
------------ ------------
Net sales...................................... $ 844,689 $ 536,240
Costs and expenses:
Cost of operations........................... 611,540 380,130
Selling, general and administrative expenses. 144,772 99,380
Depreciation and amortization................ 28,058 19,338
------------ ------------
Earnings from operations....................... 60,319 37,392
Interest expense............................... 25,080 17,197
Other income, net.............................. 1,412 2,271
------------ ------------
Earnings before income tax expense............. 36,651 22,466
Income tax expense............................. 14,183 9,236
------------ ------------
Net earnings................................... $ 22,468 $ 13,230
============ ==========
Net earnings per common share:
Primary...................................... $ 0.37 $ 0.26
====== ======
Fully diluted................................ $ 0.37 $ 0.26
====== ======
Weighted average common and common
equivalent shares outstanding:
Primary...................................... 59,958,162 50,594,863
============ ============
Fully diluted................................ 60,693,945 50,639,977
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<C> <C>
Six Months Six Months
Ended Ended
June 30, June 30,
1996 1995
------------- ----------
Cash Flows from Operating Activities:
Net earnings................................ $ 22,468 $ 13,230
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation of property, plant and equipment 22,057 14,471
Amortization of intangible and other assets... 6,001 4,867
Noncash interest expense...................... 1,234 1,191
(Increase) decrease in receivables............ (11,453) 5,003
Increase in inventories....................... (6,729) (2,128)
(Increase) decrease in prepaid expenses and
intangible and other assets................. 15,286 (1,059)
Increase in accounts payable, accrued interest
expense and other accrued expenses.......... 24,464 3,382
Increase (decrease) in net deferred tax
liabilities................................. 526 (1,566)
Decrease in other long-term liabilities....... (17,953) (315)
----------- ----------
Net cash provided by operating activities....... 55,901 37,076
---------- ----------
Cash Flows from Investing Activities:
Proceeds from the disposal of assets............ 1,842 107
Additions to property, plant and equipment...... (14,950) (8,314)
----------- ---------
Net cash used by investing activities........... (13,108) (8,207)
----------- ---------
Cash Flows from Financing Activities:
Addition to long-term debt...................... 15,000 -
Payments of long-term debt...................... (154,711) (23,679)
Proceeds from the sale of common stock.......... 81,292 -
Proceeds from the issuance of common stock...... 9,044 199
Payments for the repurchase of common stock
warrants...................................... (1,305) (1,981)
----------- ---------
Net cash used by financing activities........... (50,680) (25,461)
----------- ---------
Net increase (decrease) in cash and cash
equivalents................................... (7,887) 3,408
Cash and cash equivalents at beginning of period. 26,412 32,145
----------- ----------
Cash and cash equivalents at end of period........ $ 18,525 $ 35,553
=========== ==========
Supplemental Disclosure:
Cash payments for income taxes, net............. $ 14,983 $ 5,972
========== ===========
Cash payments for interest expense.............. $ 22,209 $ 14,609
========== ===========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Inventories are summarized as follows, in thousands:
June 30, December 31,
1996 1995
----------- -----------
Finished products $ 122,049 $ 114,857
Work-in-process 51,500 51,259
Raw materials 102,857 103,561
----------- -----------
$ 276,406 $ 269,677
=========== ===========
(2) On March 1, 1996, the Company completed its offering of ten
million common shares generating net cash proceeds of $81.3
million which were used to repay long-term debt. This long-term
debt payment was applied in reverse order of maturity to the
term loan "C" facility of the Secured Credit Agreement.
(3) In February 1996, the Company entered into interest rate swap
agreements with two financial institutions to reduce the impact
of changes in interest rates on its floating rate long-term debt.
The two agreements, having a total notional principal amount of
$300.0 million, mature in three years. The Company is exposed
to credit loss in the event of nonperformance by the other
parties to the interest rate swap agreement; however,
the Company does not anticipate nonperformance by the
counterparties.
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
RESULTS OF OPERATIONS
Furniture Brands International, Inc. (the "Company") is a major manufacturer of
residential furniture. The Company has three primary operating subsidiaries;
Broyhill Furniture Industries, Inc., The Lane Company, Incorporated and
Thomasville Furniture Industries, Inc.
On December 29, 1995, the Company acquired Thomasville Furniture Industries,
Inc.("Thomasville"). The transaction was accounted for as a purchase and, since
the acquisition occurred as of the last business day of 1995, has been reflected
in the Company's consolidated balance sheet as of December 31, 1995.
The Company's results of operations for 1995 do not include any of the
operations of Thomasville.
Comparison of Three Months and Six Months Ended June 30, 1996 and 1995
- ----------------------------------------------------------------------
Selected financial information for the three months and six months ended June
30, 1996 and 1995 is presented below:
($ in millions, except per share data)
<TABLE>
<S> <C> <S> <C> <S>
Three Months Ended
-----------------------------------------------
June 30, 1996 June 30, 1995
------------------------ -------------------
% of % of
$ net sales $ net sales
---------- ----------- ------- ---------
Net sales 420.8 100.0% 250.3 100.0%
Earnings from operations 29.6 7.0% 16.1 6.4%
Interest expense 11.4 2.7% 8.4 3.4%
Income tax expense 7.3 1.7% 3.7 1.5%
Net earnings 11.7 2.8% 5.5 2.2%
Net earnings per common share 0.18 - 0.11 -
Six Months Ended
-----------------------------------------------
June 30, 1996 June 30, 1995
----------------------- -------------------
% of % of
$ net sales $ net sales
---------- --------- ------- ---------
Net sales 844.7 100.0% 536.2 100.0%
Earnings from operations 60.3 7.1% 37.4 7.0%
Interest expense 25.1 3.0% 17.2 3.2%
Income tax expense 14.2 1.7% 9.2 1.7%
Net earnings 22.5 2.7% 13.2 2.5%
Net earnings per common share 0.37 - 0.26 - <PAGE>
</TABLE>
For the three months ended June 30, 1996, net sales increased by $170.5
million, or 68.1%, compared to a decrease for the three months ended June
30, 1995 of 8.0%. For the six months ended June 30, 1996, net sales
increased by $308.5 million, or 57.5%, compared to a decrease for the six
months ended June 30, 1995 of 0.9%. The improved sales performance
resulted primarily from the acquisition of Thomasville.
Earnings from operations for the three months ended June 30, 1996
increased by $13.5 million or 84.0% from the comparable prior year
period. Earnings from operations for the three months ended June 30,
1996 and June 30, 1995 were 7.0% and 6.4% of net sales, respectively.
For the six months ended June 30, 1996, earnings from operations
increased by $22.9 million, or 61.3%, compared to a decrease of 6.7% for
the six months ended June 30, 1995. As a percent of net sales, earnings
from operations for the six months ended June 30, 1996 and June 30, 1995
were 7.1% and 7.0%, respectively. The increase in operating earnings was
due to the Thomasville acquisition as well as improved operating
performance at the other operating companies. Strong order rates allowed
the Company's manufacturing plants to run efficiently during the quarter.
<PAGE>
Interest expense totaled $11.4 million and $25.1 million for the three
months and six months ended June 30, 1996, respectively, compared to $8.4
million and $17.2 million in the prior year comparable periods. The
increase in interest expense reflects the additional debt incurred for
the acquisition of Thomasville.
The effective income tax rates were 38.6% and 38.7% for the three months
and six months ended June 30, 1996, respectively, compared to 40.8% and
41.1% for the prior year periods, respectively. The effective income tax
rates for each period were adversely impacted by certain nondeductible
expenses incurred and provisions for state and local taxes.
Net earnings per common share on both a primary and fully diluted basis
were $0.18 and $0.37 for the three months and six months ended June 30,
1996, respectively, compared with $0.11 and $0.26 for the same periods
last year, respectively. Average common and common equivalent shares
outstanding used in the calculation of net earnings per common share on a
primary and fully diluted basis were 63,703,924 and 64,019,160,
respectively, for the three months ended June 30, 1996 and 50,594,863 and
50,639,977, respectively, for the three months ended June 30, 1995. For
the six months ended June 30, 1996 and June 30, 1995 average common and
common equivalent shares outstanding used in the calculation of net
earnings per common share on a primary and fully diluted basis were
59,958,162 and 60,693,945, respectively, and 50,594,863 and 50,639,977,
respectively.
FINANCIAL CONDITION
Working Capital
- ---------------
Cash and cash equivalents at June 30, 1996 amounted to $18.5 million,
compared to $26.4 million at December 31, 1995. During the six months
ended June 30, 1996, net cash provided by operating activities totaled
$55.9 million, net cash used by investing activities totaled $13.1
million and net cash used by financing activities totaled $50.7 million.
Working capital was $442.1 million at June 30, 1996, compared to $455.0 million
at December 31, 1995. The current ratio was 3.8 to 1 at June 30, 1996,
compared to 4.4 to 1 at December 31, 1995.
Financing Arrangements
- ----------------------
As of June 30, 1996, long-term debt, including current maturities,
consisted of the following, in millions:
Secured credit agreement 367.5
Receivables securitization facility 200.0
Other 16.5
-----
584.0
=====
On March 1, 1996, the Company completed its offering of ten million
common shares generating net cash proceeds of $81.3 million. The net
proceeds of the offering were used to repay long-term debt.
To meet short-term working capital and other financial requirements, the
Company maintains a $180.0 million revolving credit facility as part of
its Secured Credit Agreement with a group of financial institutions. The
revolving credit facility allows for both issuance of letters of credit
and cash borrowings. Letter of credit outstandings are limited to no
more than $60.0 million. Cash borrowings are limited only by the
facility's maximum availability less letters of credit outstanding. At
June 30, 1996, there were $7.0 million of cash borrowings outstanding
under the revolving credit facility and $26.6 million in letters of
credit outstanding, leaving an excess of $146.4 million available under
the revolving credit facility.
In addition to the revolving credit facility, the Company also had $11.4
million of excess availability under its Receivables Securitization
Facility as of June 30, 1996.
The Company believes its revolving credit facility, together with cash
generated from operations, will be adequate to meet liquidity
requirements for the foreseeable future.
<PAGE>
PART II OTHER INFORMATION
-------------------------
Item 2. Changes in Securities
On June 24, 1996 the Company redeemed all of its outstanding
Series 2 Warrants for a redemption price of $0.006 per
warrant. Each Series 2 Warrant gave the holder the right to
purchase one share of the Company's Common Stock at $7.13 per
share.
Item 4. Submission of Matters to a Vote of Security Holders
(a) April 23, 1996 Annual Meeting of Stockholders.
(c) Proposal to increase the shares reserved for issuance under
the Furniture Brands 1992 Stock Option Plan.
Affirmative votes 50,554,911
Negative votes 542,905
Item 5. Other Information
On July 30, 1996 the Company announced that it has executed a
commitment letter with the Company's agent banks, Bankers
Trust Company, NationsBank and Credit Lyonnais, under its
existing Secured Credit Agreement which will result in
substantial reductions in interest expense. This refinancing,
which is subject to various conditions, is expected to be
finalized by the end of September. The new secured credit
facility will be structured as a five-year, reducing revolving
credit facility with an initial commitment totaling $475
million.
On July 30, 1996 the Company announced that its Board of
Directors has authorized repurchases of the Company's
outstanding Common Stock and Series 1 Warrants in a total
amount up to $30 million over the next twelve months, subject
to certain restrictions in the Company's Secured Credit
Agreement.
Item 6. Exhibits and Reports on Form 8-K
(a) 11. Statement re Computation of Net Earnings Per Common
Share.
27. Financial Data Schedule.
99. Press Releases, dated July 30, 1996
(b) A Form 8-K was not required to be filed during the quarter
ended June 30, 1996.
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Furniture Brands International, Inc.
(Registrant)
By Steven W. Alstadt
-----------------------------
Steven W. Alstadt
Controller and
Chief Accounting Officer
Date: August 12, 1996
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
FURNITURE BRANDS INTERNATIONAL, INC.
STATEMENT RE COMPUTATION OF NET EARNINGS PER COMMON SHARE
---------------------------------------------------------
<S> <C> <C> <C>
Three Months Six Months Three and Six
Ended Ended Months Ended
June 30, June 30, June 30,
1996 1996 1995
------------- ----------- ------------
Primary:
Weighted average common shares outstanding during the
period............................................... 60,276,200 56,901,460 50,108,121
Common shares issuable on exercise of stock options (1). 985,273 906,411 486,742
Common shares issuable on exercise of warrants (2)...... 2,442,451 2,150,291 -
------------ ------------- -------------
Weighted average common and common equivalent shares
outstanding for primary calculation.................. 63,703,924 59,958,162 50,594,863
============ ============= =============
Fully diluted:
Weighted average common and common equivalent shares
outstanding for primary calculation..................... 63,703,924 59,958,162 50,594,863
Common shares issuable on exercise of stock options (3). 60,910 139,772 45,114
Common shares issuable on exercise of warrants (4)...... 254,326 596,011 -
------------ ------------- --------------
Weighted average common and common equivalent shares
outstanding for fully diluted calculation................ 64,019,160 60,693,945 50,639,977
============ ============= ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11 (CONTINUED)
FURNITURE BRANDS INTERNATIONAL, INC.
NOTES TO STATEMENT RE COMPUTATION OF NET EARNINGS PER COMMON SHARE
<S> <C>
(1) Includes common stock options, the exercise of which would result in dilution of net earnings
per common share. Such common stock options have been considered as exercised and the
proceeds therefrom were used to purchase common stock at the average common stock market
price, if the average common stock market price was higher than the common stock option
exercise price during the period.
(2) Includes common stock warrants, the exercise of which would result in dilution of net
earnings per common share. Such common stock warrants have been considered as exercised and
the proceeds therefrom were used to purchase common stock at the average common stock market
price, if the average common stock market price was higher than the common stock warrant
exercise price during the period.
(3) Additional common shares issuable resulting from the application of the same principles
described in Note (1), except that the proceeds from assumed common stock options exercised
were used to purchase common stock at the month end common stock market price, if the month
end common stock market price was higher than the average common stock market price during
the period.
(4) Additional common shares issuable resulting from the application of the same principles
described in Note (2), except that the proceeds from assumed common stock warrants exercised
were used to purchase common stock at the month end common stock market price, if the month
end common stock market price was higher than the average common stock market price during
the period.
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 6-MOS
<CASH> 18,525
<SECURITIES> 0
<RECEIVABLES> 311,086
<ALLOWANCES> 23,517
<INVENTORY> 276,406
<CURRENT-ASSETS> 602,318
<PP&E> 402,113
<DEPRECIATION> 104,656
<TOTAL-ASSETS> 1,270,333
<CURRENT-LIABILITIES> 160,202
<BONDS> 562,795
0
0
<COMMON> 61,399
<OTHER-SE> 297,761
<TOTAL-LIABILITY-AND-EQUITY> 1,270,333
<SALES> 844,689
<TOTAL-REVENUES> 844,689
<CGS> 611,540
<TOTAL-COSTS> 611,540
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,003
<INTEREST-EXPENSE> 25,080
<INCOME-PRETAX> 36,651
<INCOME-TAX> 14,183
<INCOME-CONTINUING> 22,468
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,468
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
</TABLE>
