FORM 10-Q/A-1
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, 1997 or
-------------
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.
------------------------------------------------------
(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
------------------
----------------------------------------------------------------------
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
-------- --------<PAGE>
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.
51,019,710 Shares as of July 31, 1997
------------<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Financial Statements for the quarter ended June 30, 1997.
Consolidated Balance Sheets
Consolidated Statements of Operations:
Three Months Ended June 30, 1997
Three Months Ended June 30, 1996
Six Months Ended June 30, 1997
Six Months Ended June 30, 1996
Consolidated Statements of Cash Flows:
Six Months Ended June 30, 1997
Six Months Ended June 30, 1996
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, 1997 are not necessarily indicative of the results to be
expected for the full year.<PAGE>
<TABLE>
<CAPTION>
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<S> <C> <C> <C>
June 30, December 31,
1997 1996
ASSETS ------------ ------------
Current assets:
Cash and cash equivalents....................... $ 14,905 $ 19,365
Receivables, less allowances of $16,432
($19,124 at December 31, 1996)................ 303,388 283,417
Inventories...........................(Note 1).. 295,646 281,107
Prepaid expenses and other current assets....... 24,121 23,378
----------- -----------
Total current assets.......................... 638,060 607,267
----------- -----------
Property, plant and equipment..................... 443,214 425,729
Less accumulated depreciation................... 146,488 123,767
----------- -----------
Net property, plant and equipment............. 296,726 301,962
----------- -----------
Intangible assets................................. 337,325 344,101
Other assets...................................... 16,320 15,874
----------- -----------
$ 1,288,431 $ 1,269,204
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued interest expense........................ $ 6,011 $ 6,579
Accounts payable and other accrued expenses..... 134,074 138,027
----------- -----------
Total current liabilities..................... 140,085 144,606
----------- -----------
Long-term debt..........................(Note 2).. 737,800 572,600
Other long-term liabilities....................... 130,767 132,341
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 50,685,055
shares at June 30, 1997 and 61,432,181
shares at December 31, 1996.........(Note 2).. 50,685 61,432
Paid-in capital................................. 115,849 278,554
Retained earnings............................... 113,245 79,671
----------- -----------
Total shareholders' equity.................... 279,779 419,657
----------- -----------
$ 1,288,431 $ 1,269,204
=========== ===========
See accompanying notes to consolidated financial statements.<PAGE>
</TABLE>
<TABLE>
<CAPTION>
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
(Unaudited)
<S> <C> <C> <C>
Three Months Three Months
Ended Ended
June 30, June 30,
1997 1996
------------- -------------
Net sales...................................... $ 444,152 $ 420,742
Costs and expenses:
Cost of operations........................... 321,342 302,657
Selling, general and administrative expenses. 73,380 74,568
Depreciation and amortization................ 14,415 13,880
------------ ------------
Earnings from operations....................... 35,015 29,637
Interest expense............................... 9,405 11,365
Other income, net.............................. 875 665
------------ ------------
Earnings before income tax expense............. 26,485 18,937
Income tax expense............................. 9,970 7,316
------------ ------------
Net earnings................................... $ 16,515 $ 11,621
============ ============
Net earnings per common share:
Primary...................................... $ 0.26 $ 0.18
============ ============
Fully diluted................................ $ 0.26 $ 0.18
============ ============
Weighted average common and common
equivalent shares outstanding:
Primary...................................... 63,382,118 63,703,924
============ ============
Fully diluted................................ 63,697,013 64,019,160
============ ============
See accompanying notes to consolidated financial statements.<PAGE>
</TABLE>
<TABLE>
<CAPTION>
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
(Unaudited)
<S> <C> <C> <C>
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
------------ ------------
Net sales...................................... $ 894,013 $ 844,689
Costs and expenses:
Cost of operations........................... 647,529 611,540
Selling, general and administrative expenses. 146,891 144,772
Depreciation and amortization................ 29,011 28,058
------------ ------------
Earnings from operations....................... 70,582 60,319
Interest expense............................... 18,494 25,080
Other income, net.............................. 1,747 1,412
------------ ------------
Earnings before income tax expense............. 53,835 36,651
Income tax expense............................. 20,261 14,183
------------ ------------
Net earnings................................... $ 33,574 $ 22,468
============ ============
Net earnings per common share:
Primary...................................... $ 0.53 $ 0.37
============ ============
Fully diluted................................ $ 0.53 $ 0.37
============ ============
Weighted average common and common
equivalent shares outstanding:
Primary...................................... 63,534,866 59,958,162
============ ============
Fully diluted................................ 63,928,028 60,693,945
============ ============
See accompanying notes to consolidated financial statements.<PAGE>
</TABLE>
<TABLE>
<CAPTION>
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<S> <C> <C> <C>
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
---------- ----------
Cash Flows from Operating Activities:
Net earnings.......................................$ 33,574 $ 22,468
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation of property, plant and equipment... 22,981 22,057
Amortization of intangible and other assets..... 6,030 6,001
Noncash interest expense......................... 552 1,234
Increase in receivables.......................... (19,971) (11,453)
Increase in inventories.......................... (14,539) (6,729)
Decrease in prepaid expenses and intangible and
other assets................................... 1,071 15,286
Increase (decrease) in accounts payable, accrued
interest expense and other accrued expenses.... (4,521) 24,464
Increase in net deferred tax liabilities......... 1,705 526
Decrease in other long-term liabilities.......... (2,020) (17,953)
----------- ------------
Net cash provided by operating activities............ 24,862 55,901
----------- ------------
Cash Flows from Investing Activities:
Proceeds from the disposal of assets................. 75 1,842
Additions to property, plant and equipment........... (17,820) (14,950)
----------- -----------
Net cash used by investing activities................ (17,745) (13,108)
----------- -----------
Cash Flows from Financing Activities:
Payments for debt issuance costs..................... (3,325) -
Additions to long-term debt.......................... 210,000 15,000
Payments of long-term debt........................... (44,800) (154,711)
Proceeds from the issuance of common stock........... 696 9,044
Proceeds from the sale of common stock............... - 81,292
Payment for the repurchase and retirement of
common stock....................................... (168,056) -
Payments for the repurchase of common stock warrants. (5,187) (1,305)
Payments for common stock offering expenses of
selling stockholders............................... (905) -
----------- -----------
Net cash used by financing activities................ (11,577) (50,680)
----------- -----------
Net decrease in cash and cash equivalents.............. (4,460) (7,887)
Cash and cash equivalents at beginning of period....... 19,365 26,412
----------- ------------
Cash and cash equivalents at end of period............. $ 14,905 $ 18,525
========== ===========
Supplemental Disclosure:
Cash payments for income taxes, net.................. $ 27,038 $ 14,983
========== ===========
Cash payments for interest........................... $ 18,624 $ 22,209
========== ===========
See accompanying notes to consolidated financial statements.<PAGE>
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Inventories are summarized as follows, in thousands:
June 30, December 31,
1997 1996
------------ -------------
Finished products $ 135,428 $ 127,292
Work-in-process 49,494 51,587
Raw materials 110,724 102,228
----------- -----------
$ 295,646 $ 281,107
=========== ===========
(2) On June 27, 1997, the Company completed the repurchase of
10,842,299 shares of its common stock and warrants to purchase
290,821 shares of common stock from Apollo Investment Fund,
L.P. and Lion Advisors, L.P. for approximately $170.5 million.
The Company financed the repurchase by amending its Secured
Credit Agreement to include a new term loan facility of $200.0
million. The term loan facility is a non-amortizing ten-year
facility, bearing interest at a base rate plus 0.75% or at an
adjusted Eurodollar rate plus 1.75%, depending upon the type
of loan the Company executes. Net cash proceeds received from
the term loan facility in excess of the amount required for
the stock and warrant repurchase and associated fees and
expenses were used to reduce outstanding borrowings from the
revolving credit facility under the Company's existing Secured
Credit Agreement.
(3) In February 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No.
128 (SFAS No. 128) "Earnings Per Share" (EPS). SFAS No. 128
establishes standards for computing and presenting earnings
per share. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all
entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic
EPS computation to the numerator and denominator of the
diluted EPS computation. SFAS No. 128 is effective for
financial statements for both interim and annual periods
ending after December 15, 1997,and early application is not
permitted. The Company believes the adoption of this
accounting standard will not have a material impact on
earnings per share.<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 the largest
manufacturer of residential furniture in the United States. The
Company has three primary operating subsidiaries: Broyhill
Furniture Industries, Inc.; The Lane Company, Incorporated; and
Thomasville Furniture Industries, Inc.
On June 27, 1997, the Company completed the repurchase of 10,842,299
shares of common stock and warrants to purchase 290,821 shares of
common stock from Apollo Investment Fund, L.P. and Lion Advisors,
L.P. for approximately $170.5 million. The Company financed the
repurchase by amending the Secured Credit Agreement to include a new
term loan facility of $200.0 million.
Comparison of Three Months and Six Months Ended June 30, 1997 and
1996
--------------------------------------------------------------------
Selected financial information for the three months and six months
ended June 30, 1997 and 1996 is presented below:
($ in millions except per share data)
Three Months Ended
June 30, 1997 June 30, 1996
-------------------- --------------------
% of % of
Dollars Net Sales Dollars Net Sales
------- ---------- ------- ---------
Net sales $444.1 100.0% $420.8 100.0%
Earnings from operations 35.0 7.9% 29.6 7.0%
Interest expense 9.4 2.1% 11.4 2.7%
Income tax expense 9.9 2.2% 7.3 1.7%
Net earnings 16.5 3.7% 11.7 2.8%
Net earnings per common share 0.26 - 0.18 -
Gross profit (1) $112.7 25.4% $108.5 25.8%
Six Months Ended
June 30, 1997 June 30, 1996
------------------- -------------------
% of % of
Dollars Net Sales Dollars Net Sales
------- --------- ------- ---------
Net sales $894.0 100.0% $844.7 100.0%
Earnings from operations 70.6 7.9% 60.3 7.1%
Interest expense 18.5 2.1% 25.1 3.0%
Income tax expense 20.2 2.3% 14.2 1.7%
Net earnings 33.6 3.8% 22.5 2.7%
Net earnings per common
share 0.53 - 0.37 -
Gross profit (1) $226.1 25.3% $213.8 25.3%
(1) The Company believes that gross profit provides useful
information regarding a company's financial performance. Gross
profit has been calculated by subtracting cost of operations
and the portion of depreciation associated with cost of goods
sold from net sales.
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------- --------- ------- ------
Net sales $444.1 $420.8 $894.0 $844.7
Cost of operations 321.3 302.6 647.5 611.5
Depreciation (associated
with cost of goods sold) 10.1 9.7 20.4 19.4
------ ------ ------ ------
Gross profit $112.7 $108.5 $226.1 $213.8
====== ====== ====== ======
Net sales for the three months ended June 30, 1997 were $444.1
million, compared to $420.8 million in the three months ended June
30, 1996, an increase of $23.3 million or 5.6%. For the six months
ended June 30, 1997, net sales increased $49.3 or 5.8% to $894.0
million from $844.7 million for the six months ended June 30, 1996.
The increase in net sales was achieved through continued success of
the Company's product, marketing and distribution programs.
Earnings from operations for the three months ended June 30, 1997
increased by $5.4 million or 18.1% from the comparable prior year
period. Earnings from operations for the three months ended June
30, 1997 and June 30, 1996 were 7.9% and 7.0% of net sales,
respectively. For the six months ended June 30, 1997, earnings from
operations increased by $10.3 million, or 17.0% from the comparable
six months of 1996. As a percentage of net sales, earnings from
operations for the six months ended June 30, 1997 and June 30, 1996
were 7.9% and 7.1%, respectively. The increase in operating
earnings was due to higher sales volume and good control of selling,
general and administrative expenses.
Interest expense totaled $9.4 million and $18.5 million for the
three months and six months ended June 30, 1997, respectively,
compared to $11.4 million and $25.1 million for the prior year
comparable periods. The decrease in interest expense resulted from
lower long-term debt during the periods and reduced interest rates.
The effective income tax rates were 37.6% and 38.6% for the three
months ended June 30, 1997 and June 30, 1996, respectively and 37.6%
and 38.7% for the six months ended June 30, 1997 and June 30, 1996,<PAGE>
respectively. The effective tax rates for each period were
adversely impacted by certain nondeductible expenses incurred and
provisions for state and local taxes. The effective tax rates for
the three months and six months ended June 30, 1997 were favorably
impacted due to the reduced effect of the nondeductible expenses as
a percentage of pretax earnings.
Net earnings per common share on both a primary and fully diluted
basis were $0.26 and $0.53 for the three months and six months ended
June 30, 1997, respectively, compared with $0.18 and $0.37 for the
same periods last year. 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 63,382,000 and 63,697,000,
respectively, for the three months ended June 30, 1997, and
63,704,000 and 64,019,000, respectively, for the three months ended
June 30, 1996. For the six months ended June 30, 1997 and June 30,
1996 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 63,535,000 and 63,928,000, respectively and
59,958,000 and 60,694,000, respectively.
FINANCIAL CONDITION
Working Capital
---------------
Cash and cash equivalents at June 30, 1997 amounted to $14.9
million, compared with $19.4 million at December 31, 1996. During
the six months ended June 30, 1997, net cash provided by operating
activities totaled $24.9 million, net cash used by investing
activities totaled $17.8 million and net cash used by financing
activities totaled $11.6 million.
Working capital was $498.0 at June 30, 1997, compared with $462.7
million at December 31, 1996. The current ratio was 4.6 to 1 at
June 30, 1997, compared to 4.2 to 1 at December 31, 1996.
Financing Arrangements
----------------------
As of June 30, 1997, long-term debt consisted of the following, in
millions:
Secured credit agreement
Revolving credit facility $315.0
Term loan facility 200.0
Receivables securitization facility 210.0
Other 12.8
------
$737.8
======
On June 27, 1997, the Company completed the repurchase of 10,842,299
shares of its common stock and warrants to purchase 290,821 shares<PAGE>
of common stock from Apollo Investment Fund, L.P. and Lion Advisors,
L.P. for approximately $170.5 million. The Company financed the
repurchase by amending its Secured Credit Agreement to include a new
term loan facility of $200.0 million. The term loan facility is a
non-amortizing ten-year facility, bearing interest at a base rate
plus 0.75% or at an adjusted Eurodollar rate plus 1.75%, depending
upon the type of loan the Company executes. Net cash proceeds
received from the term loan facility in excess of the amount
required for the stock and warrant repurchase and associated fees
and expenses were used to reduce outstanding borrowings from the
revolving credit facility under the Company's existing Secured
Credit Agreement.
To meet short-term capital and other financial requirements, the
Company maintains a $475.0 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, 1997, there were
$315.0 million of cash borrowings outstanding under the revolving
credit facility and $32.5 million in letters of credit outstanding,
leaving an excess of $127.5 million available under the revolving
credit facility.
In addition to the revolving credit facility, the Company also had
$15.0 million of excess availability under its Receivables
Securitization Facility as of June 30, 1997.
The Company believes its revolving credit facility within the
Secured Credit Agreement and Receivables Secruitization 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. Change in Securities
On July 7, 1997 the Company announced that on August 15, 1997
it will redeem all of its outstanding Series 1 Warrants for a
redemption price of $0.006 per warrant. Each Series 1 Warrant
gives 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 29, 1997 Annual Meeting of Stockholders.
(c) Proposal to increase the shares reserved for issuance
under the Furniture Brands 1992 Stock Option Plan.
Affirmative votes 54,833,713
Negative votes 1,109,900
Proposal to adopt the Furniture Brands Executive
Incentive Plan
Affirmative votes 53,455,983
Negative votes 2,442,511
Item 5. Other Information
On June 27, 1997, the Company announced that the secondary
offering of 11 million shares of its common stock beneficially
owned by Apollo Investment Fund, L.P. ("Apollo") and Lion
Advisors, L.P. ("Lion") on behalf of an investment account under
management was completed. At the same time, the Company closed
on its agreement with Apollo and Lion to purchase 10,842,299
shares of its common stock and 290,821 Series I Warrants
beneficially owned by Apollo and Lion. To finance the share and
warrant repurchase, which approximated $170 million, the Company
entered into a non-amortizing 10-year senior bank facility led
by Bankers Trust Company. All eight Apollo representatives
resigned from the Company's Board of Directors. On July 8, 1997
underwriters exercised their option to purchase 1,100,000 shares
to cover over-allotments in the secondary offering, if any.
On July 29, 1997, the Company announced that Katherine Button
Bell, Michael S. Gross, Brent B. Kincaid and Albert E. Suter
were elected to the Company's Board of Directors.
Item 6. Exhibits and Reports on Form 8-K
(a) 4(a) Credit Agreement, dated as of November 17, 1994, as
amended and restated as of December 29, 1995;
September 6, 1996; and June 27, 1997, among the<PAGE>
Company, Broyhill Furniture Industries, Inc., The
Lane Company, Incorporated, Thomasville Furniture
Industries, Inc., Various Banks, Credit Lyonnais New
York Branch, as Documentation Agent, Nationsbank,
N.A., as Syndication Agent and Bankers Trust
Company, as Administrative Agent.
4(b) Amendment No. 3, dated as of June 27, 1997, to the
Purchase and Contribution Agreement, dated as of
November 15, 1994, as amended and restated as of
December 29, 1995; June 27, 1996; and September 6,
1996 among The Lane Company, Incorporated, Action
Industries, Inc., Broyhill Furniture Industries,
Inc. and Thomasville Furniture Industries, Inc. as
Sellers and INTERCO Receivables Corp. as Purchaser.
4(c) Amendment No. 3, dated as of June 27, 1997, to the
Receivables Purchase Agreement, dated as of November
15, 1994, as amended and restated as of December 29,
1995; June 27, 1996; and September 6, 1996 among
INTERCO Receivables Corp. as Seller, Atlantic Asset
Securitization Corp., as Issuer, and Credit Lyonnais
New York Branch, as Agent for the Investors.
11. Statement Re Computation of Net Earnings Per Common
Share.
27. Financial Data Schedule
(b) A Form 8-K was filed on May 29, 1997, announcing a
plan for Apollo and its affiliate Lion to exit all
or substantially all of its investment in the
Company.<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 15, 1997<PAGE>
