SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999 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.
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(Exact name of registrant as specified in its charter)
Delaware 43-0337683
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 South Hanley Road, St. Louis, Missouri 63105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 314/863-1100
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange on
Title of each class which registered
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Common Stock - $1.00 Stated Value New York Stock Exchange
with Preferred Stock Purchase Rights
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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(Title of Class)
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of February 29, 2000, was approximately $789,303,042.
<PAGE>
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
49,374,923 shares as of February 29, 2000
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Definitive Proxy Statement for Annual Meeting
of Stockholders on April 27, 2000 ................... Part III
<PAGE>
PART I
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Item 1. Business
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(a) General Development of Business
On February 10, 1999, the Company and Benchmark Home Furnishings, Inc. announced
a cooperative effort to develop a 160,000 square foot Benchmark store in Kansas
City dedicated exclusively to products manufactured by the Company.
On February 17, 1999, the Company and Kittle's Home Furnishings, Inc. announced
a strategic alliance whereby Kittle's has agreed to expand its commitment to
products manufactured by the Company.
On February 26, 1999, the Company and Outlook International, Ltd. announced an
agreement in which Outlook will act as exclusive representative for the Company
for manufacture of products in the Far East.
On June 10, 1999, the Company and America's Research Group announced a
comprehensive agreement whereby America's Research Group will provide a wide
range of consumer research services on an exclusive basis. These services will
include consumer research on new product lines before they are introduced at
market, and post-market retailer and consumer evaluation. The services will also
include surveys on the general population or targeted segments on any number of
issues, including satisfaction with certain products, the effect of advertising
programs, brand name recognition and consumer preferences with respect to retail
furniture displays.
In November of 1999, Thomasville Furniture Industries, Inc. signed a license
agreement with Home Depot, the world's largest home improvement retailer. Under
the agreement, Home Depot will sell high-quality kitchen and bathroom cabinets
under the Thomasville brand name beginning in mid-2000.
On January 10, 2000, Thomasville Furniture Industries, Inc. announced a license
agreement with Harrods Department Store, under which Highland House, a division
of Thomasville, will design and manufacture the Harrods Of Knightsbridge Fine
Furniture Collection.
(c) Narrative Description of Business
The Company, the largest manufacturer of residential furniture in the United
States, markets its products through its three operating subsidiaries: Broyhill
Furniture Industries, Inc.; Lane Furniture Industries, Inc.; and Thomasville
Furniture Industries, Inc.
PRODUCTS
The Company manufactures and distributes (i) case goods, consisting of bedroom,
dining room and living room furniture, (ii) stationary upholstery products,
consisting of sofas, loveseats, sectionals and chairs, (iii) occasional
furniture, consisting of wood tables, accent pieces, home entertainment centers
and home office furniture, and (iv) recliners, motion furniture and sleep sofas.
The Company's brand name positioning by price and product category is shown
below.
<TABLE>
<CAPTION>
UPHOLSTERY
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RECLINER/
PRICING CATEGORY CASE GOODS OCCASIONAL STATIONARY MOTION
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<S> <C> <C> <C> <C>
PREMIUM Thomasville Thomasville Thomasville
BEST Thomasville Thomasville Thomasville Thomasville
Lane Lane Lane Lane
Broyhill Broyhill Broyhill Broyhill
BETTER Lane Lane Lane Lane
Broyhill Broyhill Broyhill Broyhill
GOOD Broyhill Broyhill Broyhill Broyhill
Lane Lane
PROMOTIONAL Founders
RTA Creative Interiors
</TABLE>
BROYHILL FURNITURE INDUSTRIES
Broyhill produces collections of medium-priced bedroom, dining room, upholstered
and occasional furniture aimed at middle-income consumers. Broyhill's wood
furniture offerings consist of bedroom, dining room and living room furniture,
occasional tables, accent items, free-standing home entertainment centers and
home office furniture. Upholstered products include sofas, sleep sofas,
loveseats, sectionals, chairs, and fully reclining furniture all offered in a
variety of fabrics and leathers. Broyhill's residential furniture divisions
produce a wide range of furnishings in country, traditional, European,
contemporary and lifestyle designs.
The widely recognized Broyhill trademarks include Broyhill and Broyhill
Signature Series. The flagship Broyhill product line concentrates on bedroom,
dining room, upholstered and occasional furniture designed for the "good" and
"better" price categories. The Broyhill Signature Series product line enjoys an
excellent reputation for classically styled, complete furniture collections in
the "best" price category.
LANE FURNITURE INDUSTRIES
Lane manufactures and markets a broad range of high quality furniture targeting
the "good", "better" and "best" price categories. Lane targets niche markets
with its three operating divisions, which participate in such segments of the
residential furniture market as motion furniture, wicker and rattan, and cedar
chests.
Action Industries manufactures and markets reclining chairs and motion furniture
in the "good," "better" and "best" price categories under the Lane brand name.
Motion furniture consists of sofas and loveseats with recliner-style moving
parts and comfort features, wall saver recliners, pad-over chaise recliners,
hi-leg recliners, sleep sofas and motion sectionals. Royal Development Company
designs and manufactures the mechanisms used in Action Industries' reclining
furniture products.
In March of 1999, Action introduced the Lane Leather collection. Lane Leather
represents an important source of growth as leather is the fastest-growing
category in upholstered furniture. The collection, priced in the "best" category
comes in three styles - American Ranch, American Traditional and Urban
Contemporary.
Lane Division manufactures and sells cedar chests, living room, bedroom and
dining room furniture, wall systems, desks, console tables and mirrors and other
occasional wood pieces. Lane Division furniture is sold in the "better" and
"best" price categories.
Laneventure manufactures and markets moderately priced wicker, rattan and bamboo
furniture, tables, occasional wood pieces and two lines of upholstered
furniture. One line is comprised of contemporary and modern upholstered
furniture and metal and glass occasional and dining tables, and the other which
is comprised of traditional and contemporary upholstered furniture, primarily
sofas, loveseats, chairs and ottomans. Laneventure also manufactures outdoor and
patio furniture featuring fast drying upholstered cushions under the names
WeatherMaster and Weathercraft, which have developed significant consumer
acceptance. In 1999 Laneventure entered two new markets - exposed aluminum and
teak.
THOMASVILLE FURNITURE INDUSTRIES
Thomasville manufactures and markets wood furniture, upholstered products and
promotional/RTA furniture. Thomasville markets its products primarily under the
Thomasville brand name. Thomasville offers an assortment of upholstery and wood
under one brand name that targets the "best" and "premium" price categories.
Upholstery is primarily marketed in three major styles: traditional, American
traditional/country and casual/lifestyle contemporary. Upholstery style is
determined by both frame style and fabric or leather selection. Thomasville's
frame assortment allows the consumer to select from a wide variety of different
styles within the general style categories, and as much as 45% of the
Thomasville fabric and leather offering changes in a 12 month period, insuring
that the latest colors and textures are available. Wood furniture is primarily
marketed in four major styles: American traditional/ country, 18th century,
European traditional and casual contemporary.
Hickory Chair manufactures and markets traditional styles of upholstered
furniture, dining room collections and occasional tables in the "best" and
"premium" price categories. The Hickory Chair division has been crafting fine
reproductions of 18th century furniture for over 80 years. For example, Hickory
Chair offers the James River collection which features reproductions of fine
furnishings from Virginia plantations, and the Mount Vernon collection, which
features reproductions from George Washington's home. In October of 1999,
Hickory Chair introduced its Thomas O'Brien collection, which includes
upholstery, chairs, tables, beds and cabintry in O'Brien's acclaimed "warm
modernist" style. Hickory Chair also introduced Grand Vista, a collection of
larger scale, casual reproductions from the Museum of Santa Fe.
Pearson has been manufacturing and selling contemporary and traditional styles
of finely tailored upholstered furniture including sofas, loveseats, chairs and
ottomans for over 50 years. Pearson furniture sells in the "premium" price
category and is distributed to high-end furniture stores and interior designers.
HBF manufactures and sells a line of office furniture, including chairs, tables,
conference tables, desks and credenzas, in the upper-medium price range.
Highland House manufactures upholstered products in the "better" and "best"
price categories. During 1999, Highland House introduced the Rue de Provence
collection of Provencal French bedroom pieces, occasional furniture and
upholstery pieces that use unique fabric selections supplied exclusively to
Highland House from southern France.
Founders offers assembled bedroom sets, bookcases and home entertainment centers
under the Founders brand name to a variety of retailers for sale to consumer
end-users and certain contract customers. Creative Interiors markets RTA
(ready-to-assemble) furniture such as home entertainment centers, bookcases,
bedroom and kitchen/utility furniture and computer desks under the Creative
Interiors brand name.
DISTRIBUTION
The Company's strategy of targeting diverse distribution channels such as
furniture centers, independent dealers, national and local chain stores,
department stores, specialty stores and decorator showrooms is supported by
dedicated sales forces covering each of these distribution channels. The Company
continues to explore opportunities to expand international sales and to
distribute through non-traditional channels such as wholesale clubs and catalog
retailers.
The Company's breadth of product and national scope of distribution enable it to
effectively service national retailers such as J.C. Penney, HomeLife and
Heilig-Meyers and key regional retailers such as Havertys, Breuner's and
Kittle's. The consolidation of the retail residential furniture industry has
made access to distribution channels an important competitive advantage for
manufacturers. The Company has developed dedicated distribution channels by
expanding its gallery program and the network of independent dealer-owned
dedicated retail locations, such as Thomasville Home Furnishings Stores. The
Company distributes its products through a diverse network of
independently-owned retail locations, which includes 120 free-standing stores,
1,148 galleries and 523 furniture centers.
Haverty Furniture Companies, Inc. and the Company have formed a strategic
alliance whereby Havertys will allocate up to one-half of the retail floor space
in all of its stores to the prominent display of product manufactured by the
Company. This alliance advances the Company's strategy of expanding distribution
and dedicated display space.
In February of 1999, the Company and Benchmark Home Furnishings, Inc. announced
a cooperative effort to develop a 160,000 square foot Benchmark store in Kansas
City dedicated exclusively to products manufactured by the Company.
In February of 1999, the Company and Kittle's Home Furnishings, Inc. announced a
strategic alliance whereby Kittle's has agreed to expand its commitment to
products manufactured by the Company.
Broyhill, Lane and Thomasville have all developed gallery programs with
dedicated dealers displaying furniture in complete room ensembles. These
retailers employ a consistent showcase gallery concept wherein products are
displayed in complete and fully accessorized room settings instead of as
individual pieces. This presentation format encourages consumers to purchase an
entire room of furniture instead of individual pieces from different
manufacturers. The Company offers substantial services to retailers to support
their marketing efforts, including coordinated national advertising,
merchandising and display programs and extensive dealer training.
Thomasville Home Furnishings Stores are dealer-owned, free-standing retail
locations that exclusively feature Thomasville furniture. The Company believes
distributing its products through dedicated, free-standing stores strengthens
brand awareness, provides well-informed and focused sales personnel and
encourages the purchase of multiple items per visit. Management is currently
evaluating similar opportunities to jointly market Broyhill, Lane and
Thomasville products in dealer-owned retail stores.
Showrooms for the national furniture market are located in Thomasville and High
Point, North Carolina and for regional markets in Atlanta, Georgia; Chicago,
Illinois; and San Francisco, California.
BROYHILL FURNITURE INDUSTRIES
One of Broyhill's principal distribution channels is the Broyhill Showcase
Gallery program. This program, started in 1983, involves 345 domestic and
international participating dealer locations. Each dealer in the Broyhill
Showcase Gallery program owns the gallery and the Broyhill furniture inventory.
The program incorporates a core merchandise program, advertising material
support, in-store merchandising events and educational opportunities for the
retail store sales and management personnel. The average Broyhill Showcase
Gallery consists of 7,500 square feet of dedicated display space. Furniture is
displayed in complete and fully accessorized room settings instead of as
individual pieces.
For the retailer that is currently not a participant in the gallery program,
Broyhill offers the Independent Dealer Program. This concept, initiated in 1987,
is designed to strengthen Broyhill's relationship with these retailers by
assisting them in overcoming some of the significant difficulties in running an
independent furniture business. Participating retailers in the Independent
Dealer Program commit to a minimum, pre-selected lineup of Broyhill merchandise
and, in return, receive a detailed, step-by-step, year-round advertising and
merchandising plan. The program includes three major sales events per year,
monthly promotional themes and professionally prepared advertising and
promotional materials at nominal cost in order to help increase consumer
recognition on the local level. As part of the Independent Dealer Program,
Broyhill offers the Broyhill Furniture Center Program to 523 retailers that have
committed at least 2,000 square feet exclusively to Broyhill products arranged
in gallery-type room settings. This program includes all of the benefits of the
Independent Dealer Program, plus additional marketing, design and advertising
assistance. The Company seeks to develop these relationships so that some of
these retailers may eventually become participants in the Broyhill Showcase
Gallery program.
LANE FURNITURE INDUSTRIES
Lane distributes its products nationally and internationally through a well
established network of approximately 16,000 retail locations. A diverse
distribution network is utilized in keeping with Lane's strategy of supplying
customers with highly specialized products in selected niche markets. This
distribution network primarily consists of independent furniture stores,
regional chains such as Havertys and Art Van, and department store companies
such as J.C. Penney, HomeLife, May Department Stores, Federated Department
Stores and Dillard Department Stores.
Lane has established specialty gallery programs with 509 participating dealers.
This includes 242 dealer-owned Comfort Showcase Galleries established by Action
Industries. The Comfort Showcase Galleries average approximately 4,200 square
feet of retail space specifically dedicated to the display, promotion and sale
of Action Industries' products. Lane's other gallery programs consist of Lane
Division galleries which display Lane case goods and upholstered furniture and
Cedar Chest Boutiques.
THOMASVILLE FURNITURE INDUSTRIES
Thomasville products are offered at 675 independently-owned retail locations,
including 235 Thomasville Galleries, 120 Thomasville Home Furnishings Stores and
320 authorized dealers. The Thomasville Gallery concept was initiated in 1983.
Thomasville Galleries have an average 7,500 square feet of retail space
specifically dedicated to the display, promotion and sale of Thomasville
products. The first Thomasville Home Furnishings Store opened in 1988. The
typical Thomasville Home Furnishings Store is a 15,000 square foot
independently-owned store offering a broad range of Thomasville products,
presented in a home-like setting by specially trained salespersons.
Pearson distributes its products primarily through premium-quality dealers and
the interior design trade. Hickory Chair also distributes through
premium-quality dealers including 59 gallery locations.
Thomasville's Founders division sells promotional furniture to a variety of
retailers for sale to consumer end-users and certain contract customers.
Promotional furniture is sold to retail chains such as Value City, as well as
independent furniture stores. Promotional furniture is also sold in the
hospitality and health care markets of Thomasville's contract business.
Thomasville's Creative Interiors division sells RTA furniture to customers which
include national chains such as Wal-Mart and Target, catalog showrooms, discount
mass merchandisers, warehouse clubs and home furnishings retailers.
MARKETING AND ADVERTISING
Advertising is used to increase consumer awareness of the Company's brand names
and is targeted to specific consumer segments through national and regional
television as well as leading shelter and other popular magazines such as Better
Homes and Gardens, People and Good Housekeeping. Each operating company uses
focused advertising in major markets to create buying urgency around specific
sale events and to provide dealer location information, enabling retailers to be
listed jointly in advertisements for maximum advertising efficiency and shared
costs. The Company seeks to increase consumer buying and strengthen
relationships with retailers through cooperative advertising and selective
promotional programs. The Company focuses its marketing efforts on prime
potential consumers utilizing information from databases and from callers to
each operating company's toll-free telephone number.
BROYHILL FURNITURE INDUSTRIES
Broyhill's advertising programs focus on translating its strong consumer
awareness into increased sales. Broyhill's current marketing strategy features
national cable television advertising, in addition to its national print
advertising program and traditional promotional programs such as furniture
"giveaways" on television game shows and dealer-based promotions such as product
mailings and brochures. The national print advertising program, which consists
of multi-page layouts, is designed to appeal to the consumer's desire for
decorating assistance and increased confidence in making the decision to
purchase a big ticket product such as furniture. These advertisements are run in
publications such as Good Housekeeping and Better Homes and Gardens which appeal
to Broyhill's consumer base. Game show promotions, a long-standing Broyhill
tradition, include popular programs such as Wheel of Fortune and The Price is
Right. An extensive public relations campaign also exposes Broyhill products in
leading magazine and newspaper editorial features.
LANE FURNITURE INDUSTRIES
Lane's marketing approach reflects the diversity of its various divisions.
Action Industries employs an integrated marketing/advertising strategy in which
it coordinates magazine, newspaper, circular and television advertising with
other marketing programs to promote a single product. The other Lane divisions
began using television advertising in 1998. These commercials featured the Eddie
Bauer Lifestyles by Lane collection, produced by the Lane Division and
Laneventure. Each of the Lane divisions advertises extensively in trade and
consumer publications targeting various niche markets.
THOMASVILLE FURNITURE INDUSTRIES
Thomasville's current advertising appears in gardening, lifestyle, travel,
epicurean, arts/culture and women's special interest magazines, and national
cable television commercials during peak promotional periods. The campaign
emphasizes Thomasville fashion and quality leadership through the use of
dramatic photographs featuring individual, high quality wood and upholstery
pieces. The campaign includes advertising in the following magazines:
Architectural Digest, Traditional Home, Country Gardens, Better Homes and
Gardens, In Style, Martha Stewart Living, Travel & Leisure, Smithsonian, Vanity
Fair, Food & Wine and Mirabella. National cable networks include A&E, The
Discovery Channel, CNN, CNN Headline News, The Weather Channel, TNN,
Nickelodeon, The Travel Channel, TBS and Entertainment Network.
To help retailers sell its products through to consumers, Thomasville offers a
full twelve month schedule of promotional support which includes promotional
concepts, selected product discounts, cooperative advertising funds for stores
that sell only Thomasville products, and a complete advertising package with
color newspaper layouts plus radio and television commercials dealers can use as
supplied. Thomasville runs national sale events to coincide with major industry
sale periods. These events include national print ads or Thomasville-designed
newspaper inserts for dealer use.
MANUFACTURING
Broyhill operates 17 finished case goods and upholstery production and warehouse
facilities totalling over 4.9 million square feet. All finished goods plants are
located in North Carolina. Broyhill pioneered the use of mass production
techniques in the furniture industry and by utilizing longer production runs
achieves economies of scale.
Lane operates 10 finished case goods and upholstery production and warehouse
facilities in Virginia, North Carolina and Mississippi totalling over 4.5
million square feet. Since the late 1980s, significant capital expenditures have
been made to acquire technologically advanced manufacturing equipment which has
increased factory productivity as well as capacity.
Thomasville manufactures or assembles its products at 21 finished case goods and
upholstery production and warehouse facilities located in North Carolina,
Virginia, and Tennessee totalling over 7.2 million square feet. Each plant is
specialized, manufacturing premium furniture products, allowing more efficient
production runs while maintaining high quality standards.
The manufacturing process for Thomasville's Creative Interiors division is
highly automated. Large fiberboard and particleboard sheets are machine-finished
in long production runs, then stored and held for assembly using highly
automated assembly lines. Completed goods are stored in an automated warehouse
to provide quicker delivery to customers. Ninety percent of Creative Interiors
products are shipped within 14 days of production.
RAW MATERIALS AND SUPPLIERS
The raw materials used by the Company in manufacturing its products include
lumber, veneers, plywood, fiberboard, particleboard, paper, hardware, adhesives,
finishing materials, glass, mirrored glass, fabrics, leathers and upholstered
filling material (such as synthetic fibers, foam padding and polyurethane
cushioning). The various types of wood used in the Company's products include
cherry, oak, maple, pine and pecan, which are purchased domestically, and
mahogany, which is purchased abroad. Fabrics, leathers and other raw materials
are purchased both domestically and abroad. Management believes that its supply
sources for those materials are adequate.
On February 26, 1999, the Company and Outlook International, Ltd. announced an
agreement in which Outlook will act as exclusive representative for the Company
for the manufacture of products in the Far East.
Other than Outlook International, the Company has no long-term supply contracts
and has experienced no significant problems in supplying its operations.
Although the Company has strategically selected suppliers of raw materials, the
Company believes that there are a number of other sources available,
contributing to its ability to obtain competitive pricing for raw materials. Raw
materials prices fluctuate over time depending upon factors such as supply,
demand and weather. Increases in prices may have a short-term impact on the
Company's margins for its products.
The majority of supplies for promotional and RTA products are purchased
domestically, although paper and certain hardware is purchased abroad.
Management believes, however, that its proximity to and relationships with
suppliers are advantageous for the sourcing of such materials. In addition, by
combining the purchase of various raw materials (such as foam, cartons, springs
and fabric) and services, Broyhill, Lane, and Thomasville have been able to
realize cost savings.
ENVIRONMENTAL MATTERS
The Company is subject to a wide-range of federal, state and local laws and
regulations relating to protection of the environment, worker health and safety
and the emission, discharge, storage, treatment and disposal of hazardous
materials. These laws include the Clean Air Act of 1970, as amended, the
Resource Conservation and Recovery Act, the Federal Water Pollution Control Act
and the Comprehensive Environmental, Response, Compensation and Liability Act
("Superfund"). Certain of the Company's operations use glues and coating
materials that contain chemicals that are considered hazardous under various
environmental laws. Accordingly, management closely monitors the Company's
environmental performance at all of its facilities. Management believes the
Company is in substantial compliance with all environmental laws. While the
Company may be required to make capital investments at some of its facilities to
ensure compliance, the Company believes it will continue to meet all applicable
requirements in a timely fashion and that the amount of money required to meet
these requirements will not materially affect its financial condition or its
results of operations.
The Company has been identified as a potentially responsible party ("PRP") at a
number of superfund sites. The Company believes that its liability with respect
to most of the sites is de minimis, and the Company is entitled to
indemnification by others with respect to liability at certain sites. Management
believes that any liability as a PRP with regard to the superfund sites will not
have a material adverse effect on the financial condition or results of
operations of the Company.
COMPETITION
The furniture manufacturing industry is highly competitive. The Company's
products compete with products made by a number of furniture manufacturers,
including Lifestyle Furnishings International Ltd., La-Z-Boy Incorporated,
Bassett Furniture Industries, Inc., and Ethan Allen Interiors, Inc. as well as
approximately 600 smaller producers. The elements of competition include
pricing, styling, quality and marketing.
EMPLOYEES
As of December 31, 1999, the Company employed approximately 21,400 people. None
of the Company's employees is represented by a union.
BACKLOG
The combined backlog of the Company's operating companies as of December 31,
1999 aggregated approximately $206 million, compared to approximately $220
million as of December 31, 1998.
<PAGE>
Item 2. Properties
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The Company owns or leases the following principal plants, offices and
warehouses:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Floor Owned
Type of Space or
Division Location Facility (Sq. Ft.) Leased
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Furniture Brands St. Louis, MO Headquarters 26,800 Leased
Broyhill Lenoir, NC Headquarters 136,000 Owned
Broyhill Lenoir, NC Plant/Warehouse 312,632 Owned
Broyhill Newton, NC Plant/Warehouse 382,626 Owned
Broyhill Lenoir, NC Plant/Warehouse 628,000 Owned
Broyhill Rutherfordton, NC Plant/Warehouse 575,656 Owned
Broyhill Lenoir, NC Plant/Warehouse 419,000 Owned
Broyhill Lenoir, NC Plant/Warehouse 390,020 Owned/
Leased
Broyhill Conover, NC Plant/Warehouse 316,542 Owned
Broyhill Lenoir, NC Plant/Warehouse 516,439 Owned
Broyhill Lenoir, NC Plant/Warehouse 256,318 Owned
Broyhill Lenoir, NC Plant 56,250 Owned
Broyhill Lenoir, NC Plant/Warehouse 252,380 Owned
Broyhill Taylorsville, NC Plant/Warehouse 212,754 Owned
Broyhill Lenoir, NC Plant 124,700 Owned
Broyhill Marion, NC Plant 22,712 Owned
Broyhill Lenoir, NC Warehouse 96,000 Owned
Broyhill Lenoir, NC Warehouse 252,250 Leased
Broyhill Lenoir, NC Warehouse 124,200 Leased
Lane Altavista, VA Plant/Warehouse 1,091,600 Owned
Lane Altavista, VA Headquarters 62,000 Owned
Lane Conover, NC Plant/Warehouse 348,180 Owned
Lane Conover, NC Plant 195,130 Owned
Lane Rocky Mount, VA Plant/Warehouse 598,962 Owned
Lane Rocky Mount, VA Plant 50,300 Owned
Lane High Point, NC Plant 187,162 Owned
Lane Pontotoc, MS Plant/Warehouse 358,652 Owned
<PAGE>
Lane Verona, MS Plant/Warehouse 410,000 Owned
Lane Saltillo, MS Plant/Warehouse 570,328 Owned
Lane Tupelo, MS Plant/Warehouse 712,675 Owned
Thomasville Thomasville, NC Headquarters/ 256,000 Owned
Showroom
Thomasville Thomasville, NC Plant/Warehouse 412,000 Owned
Thomasville Thomasville, NC Plant 240,000 Owned
Thomasville Thomasville, NC Plant 325,000 Owned
Thomasville Thomasville, NC Plant 309,850 Owned
Thomasville Lenoir, NC Plant/Warehouse 828,000 Owned
Thomasville Winston-Salem, NC Plant/Warehouse 706,000 Owned
Thomasville West Jefferson, NC Plant/Warehouse 223,545 Owned
Thomasville Johnson City, TN Plant/Warehouse 284,120 Owned
Thomasville Statesville, NC Plant 158,600 Owned
Thomasville Troutman, NC Plant 238,200 Owned
Thomasville Conover, NC Plant 123,200 Owned
Thomasville Hickory, NC Plant 58,700 Owned
Thomasville Hickory, NC Plant 98,700 Owned
Thomasville Thomasville, NC Warehouse 731,000 Owned
Thomasville Appomattox, VA Plant/Warehouse 804,000 Owned
Thomasville Carysbrook, VA Plant 189,000 Owned
Thomasville Hickory, NC Plant/Warehouse 215,500 Leased
Thomasville Conover, NC Plant/Warehouse 231,250 Owned
Thomasville Hickory, NC Plant/Warehouse 641,214 Owned
Thomasville Hickory, NC Plant/Warehouse 179,902 Owned
Thomasville High Point, NC Plant/Warehouse 163,500 Owned
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</TABLE>
The Tupelo, Mississippi facility is encumbered by a mortgage and first lien
securing industrial revenue bonds.
The Company believes its properties are generally well maintained, suitable for
its present operations and adequate for current production requirements.
Productive capacity and extent of utilization of the Company's facilities are
difficult to quantify with certainty because in any one facility maximum
capacity and utilization varies periodically depending upon the product that is
being manufactured, the degree of automation and the utilization of the labor
force in the facility. In this context, the Company estimates that overall its
production facilities were effectively utilized during 1999 at moderate to high
levels of productive capacity and believes that in conjunction with its import
capabilities the Company's facilities have the capacity, if necessary, to expand
production to meet anticipated product requirements.
Item 3. Legal Proceedings
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The Company is or may become a defendant in a number of pending or threatened
legal proceedings in the ordinary course of business. In the opinion of
management, the ultimate liability, if any, of the Company from all such
proceedings will not have a material adverse effect upon the consolidated
financial position or results of operations of the Company and its subsidiaries.
The Company is also subject to regulation regarding environmental matters, and
is a party to certain actions related thereto. For information regarding
environmental matters, see "Item 1. Business -- Environmental Matters."
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not applicable.
<PAGE>
PART II
-------
Item 5. Market for The Registrant's Common Equity and Related Stockholder
- --------------------------------------------------------------------------
Matters
- -------
As of February 29, 2000, there were approximately 2,300 holders of record of
Common Stock.
Shares of the Company's Common Stock are traded on the New York Stock Exchange.
The reported high and low sale prices for the Company's Common Stock on the New
York Stock Exchange is included in Note 10 to the consolidated financial
statements of the Company.
The Company has not paid cash dividends on its Common Stock during the two years
ended December 31, 1998 and 1999.
A discussion of restrictions on the Company's ability to pay cash dividends is
included in Note 6 to the consolidated financial statements of the Company.
<PAGE>
<TABLE>
Item 6. Selected Financial Data
- --------------------------------
<CAPTION>
FIVE-YEAR CONSOLIDATED FINANCIAL REVIEW
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
(Dollars in thousands Year Ended December 31,
except per share data) 1999 1998 1997 1996 1995a
- ----------------------------------------------------------------------------------------------
Summary of operations:
Net sales $2,088,112 $1,960,250 $1,808,276 $1,696,795 $1,073,889
Gross profit 550,312 515,512 450,690 431,473 291,237
Interest expense 37,577 43,455 42,747 45,217 33,845
Earnings before income tax
expense, and extraordinary
item 176,764 152,143 107,254 88,292 57,038
Income tax expense 64,854 54,205 40,201 34,070 22,815
Earnings from continuing
operations 111,910 97,938c 67,053 54,222 34,223b
Extraordinary item - - - (7,417) (5,815)
Net earnings $ 111,910 $ 97,938 $ 67,053 $ 46,805 $ 28,408
Per share of common stock
- diluted:
Earnings from continuing
operations $ 2.14 $ 1.82c$ 1.15 $ 0.88 $ 0.67b
Extraordinary item - - - (0.12) (0.11)
Net earnings $ 2.14 $ 1.82 $ 1.15 $ 0.76 $ 0.56
Weighted average common shares
- diluted (in thousands) 52,335 53,809 58,473 61,946 50,639
Other information:
Working capital $ 518,036 $ 509,148 $ 482,288 $ 462,661 $ 455,036
Property, plant and equipment,
net 297,746 293,777 294,061 301,962 306,406
Capital expenditures 48,951 44,358 40,004 40,344 35,616
Total assets 1,288,834 1,303,204 1,257,236 1,269,204 1,291,739
Long-term debt 535,100 589,200 667,800 572,600 705,040
Shareholders' equity $ 474,197 $ 413,509 $ 323,322 $ 419,657 $ 301,156
=================================================================================================
</TABLE>
(a) On December 31, 1995, the Company purchased Thomasville. The Company's
results of operations for 1995 do not include any of the operations of
Thomasville, since the acquisition occurred as of the last business day of
the year.
b) Earnings from continuing operations before gain on insurance settlement,
net of income tax expense, and earnings per common share from continuing
operations before gain on insurance settlement, net of income tax expense,
were $29,463 and $0.58, respectively.
(c) Earnings from continuing operations before nonrecurring gain, net of income
tax expense, and earnings per common share from continuing operations
before nonrecurring gain, net of income tax expense, were $90,077 and
$1.67, respectively.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
- -----------------------------------------------------------------------
Results of Operations
- ---------------------
<TABLE>
<CAPTION>
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
As an aid to understanding the Company's results of operations on a
comparative basis, the following table has been prepared to set forth certain
statements of operations and other data for 1999, 1998, and 1997.
- ------------------------------------------------------------------------------------------------------------------------
(Dollars in millions) Year Ended December 31,
-----------------------------------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------------------------------
% of % of % of
Net Net Net
Dollars Sales Dollars Sales Dollars Sales
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $2,088.1 100.0% $1,960.2 100.0% $1,808.3 100.0%
Cost of operations 1,498.6 71.8 1,406.4 71.7 1,319.5 73.0
Selling, general and
administrative
expenses 321.2 15.4 314.8 16.1 286.1 15.8
Depreciation and
amortization 56.5 2.7 55.5 2.8 56.0 3.1
- ------------------------------------------------------------------------------------------------------------------------
Earnings from
operations 211.8 10.1 183.5 9.4 146.7 8.1
Interest expense 37.6 1.8 43.5 2.2 42.7 2.4
Other income, net 2.6 0.1 12.1 0.6 3.3 0.2
- ------------------------------------------------------------------------------------------------------------------------
Earnings before income tax
expense 176.8 8.5 152.1 7.8 107.3 5.9
Income tax expense 64.9 3.1 54.2 2.8 40.2 2.2
- ------------------------------------------------------------------------------------------------------------------------
Net earnings $ 111.9 5.4% $ 97.9 5.0% 67.1 3.7%
========================================================================================================================
Gross profit(1) $ 550.3 26.4% $ 515.5 26.3% $ 450.7 24.9%
========================================================================================================================
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.
</TABLE>
<TABLE>
<CAPTION>
(Dollars in millions) Year Ended December 31,
--------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,088.1 $1,960.2 $1,808.3
Cost of operations 1,498.6 1,406.4 1,319.5
Depreciation (associated with cost of goods sold) 39.2 38.3 38.1
---------------------------------------------------------------------------------------------------------
Gross profit $ 550.3 $ 515.5 $ 450.7
=========================================================================================================
</TABLE>
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Net sales for 1999 were $2,088.1 million compared to $1,960.2 million for
1998, an increase of $127.9 million or 6.5%. The improved sales performance for
1999 occurred at each operating company and ranged, in varying degrees, across
all product lines. The increase in net sales was achieved through continued
introductions of new products, emphasis on the Company's brand names, and
expansion of distribution.
Cost of operations for 1999 was $1,498.6 million compared to $1,406.4
million for 1998, an increase of 6.6%. Cost of operations as a percentage of net
sales increased from 71.7% for 1998 to 71.8% in 1999 primarily due to the
disposal of low-margin and nonproductive inventories at less than normal profit
margins, and to a lesser degree, from short-term manufacturing inefficiencies at
several plants caused by an evolving change in case goods product mix.
<PAGE>
Selling, general and administrative expenses increased to $321.2 million in
1999 from $314.8 million in 1998, an increase of 2.0%. As a percentage of net
sales, selling, general and administrative expenses decreased from 16.1% for
1998 to 15.4% for 1999 because of continued tight control over expenses.
Depreciation and amortization for 1999 was $56.5 million compared to $55.5
million in 1998, an increase of 1.8%. The amount of depreciation and
amortization attributed to the "fresh-start" reporting was $13.2 million and
$13.7 million in 1999 and 1998, respectively.
Interest expense for 1999 totaled $37.6 million compared with $43.5 million
in 1998. The decrease in interest expense reflects the Company's debt reduction
program and reduced interest rates.
Other income, net for 1999 totaled $2.6 million compared to $12.1 million
for 1998, which included a nonrecurring cash dividend of $9.4 million. For 1999,
other income consisted of interest on short-term investments of $0.4 million and
other miscellaneous income and expense items totaling $2.2 million.
Income tax expense for 1999 totaled $64.9 million, producing an effective
tax rate of 36.7% compared with an effective tax rate of 35.6% for 1998. The
effective tax rates for both periods were adversely impacted by certain
nondeductible expenses incurred and provisions for state and local income taxes.
The effective tax rate for 1998 was favorably impacted by the nontaxable portion
of the $9.4 million cash dividend.
Net earnings per common share on a diluted basis were $2.14 and $1.82 for
1999 and 1998, respectively. Weighted average shares outstanding used in the
calculation of net earnings per common share on a basic and diluted basis were
50,968,000 and 52,335,000 in 1999, respectively, and 52,095,000 and 53,809,000
in 1998, respectively.
Gross profit for 1999 was $550.3 million compared with $515.5 million in
1998, an increase of 6.8%. The increase in gross profit margin to 26.4% in 1999
from 26.3% in 1998 was due to improved manufacturing capacity utilization,
partially offset by an inventory reduction program and a change in case goods
product mix.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net sales for 1998 were $1,960.2 million compared to $1,808.3 million for
1997, an increase of $151.9 million or 8.4%. The improved sales performance for
1998 occurred at each operating company and ranged, in varying degrees, across
all product lines. The increase in net sales was achieved through continued
introductions of new products, emphasis on the Company's brand names, and
expansion of distribution.
Cost of operations for 1998 was $1,406.4 million compared to $1,319.5
million for 1997, an increase of 6.6%. Cost of operations as a percentage of net
sales decreased from 73.0% for 1997 to 71.7% in 1998 primarily due to improved
manufacturing capacity utilization, reduced stock keeping units, and ongoing
cost reduction programs.
Selling, general and administrative expenses increased to $314.8 million in
1998 from $286.1 million in 1997, an increase of 10.0%. As a percentage of net
sales, selling, general and administrative expenses increased from 15.8% for
1997 to 16.1% for 1998 because of tight spending controls implemented during the
fourth quarter of 1997 to help offset an operational restructuring at
Thomasville and a temporary promotional product mix change.
Depreciation and amortization for 1998 was $55.5 million compared to $56.0
million in 1997, a decrease of 0.9%. The amount of depreciation and amortization
attributable to the "fresh-start" reporting was $13.7 million and $16.4 million
in 1998 and 1997, respectively.
Interest expense for 1998 totaled $43.5 million compared with $42.7 million
in 1997. The increase in interest expense reflects additional long-term debt
incurred at the end of the second quarter of 1997 to finance the Company's
repurchase of approximately 10.8 million shares of its common stock.
Other income, net for 1998 totaled $12.1 million compared to $3.3 million
for 1997. For 1998, other income consisted of interest on short-term investments
of $0.9 million, a cash dividend (nonrecurring) of $9.4 million received by the
Company relating to its minority investment in a company which leases exhibition
space to furniture and accessory manufacturers, and other miscellaneous income
and expense items totaling $1.8 million.
Income tax expense for 1998 totaled $54.2 million, producing an effective
tax rate of 35.6% compared with an effective tax rate of 37.5% for 1997. The
effective tax rates for both periods were adversely impacted by certain
nondeductible expenses incurred and provisions for state and local income taxes.
The effective tax rate for 1998 was favorably impacted by the reduced effect of
the nondeductible expenses as a percentage of pretax earnings and the nontaxable
portion of the $9.4 million cash dividend.
Net earnings per common share on a diluted basis were $1.82 and $1.15 for
1998 and 1997, respectively. Weighted average shares outstanding used in the
calculation of net earnings per common share on a basic and diluted basis were
52,095,000 and 53,809,000 in 1998, respectively, and 56,438,000 and 58,473,000
in 1997, respectively.
Gross profit for 1998 was $515.5 million compared with $450.7 million in
1997, an increase of 14.4%. The increase in gross profit margin to 26.3% in 1998
from 24.9% in 1997 was due to improved manufacturing capacity utilization,
reduced stock keeping units, and ongoing cost reduction programs.
Financial Condition and Liquidity
Liquidity
Cash and cash equivalents at December 31, 1999 totaled $7.4 million
compared to $13.2 million at December 31, 1998. For 1999, net cash provided by
operating activities totaled $148.6 million. Net cash used by investing
activities totaled $48.5 million. Net cash used in financing activities totaled
$105.9 million, including the net payment of $54.1 million of long-term debt and
the repurchase of 3.1 million shares of common stock for $59.7 million.
Working capital was $518.0 million at December 31, 1999 compared to $509.1
million at December 31, 1998. The current ratio was 4.4-to-1 at December 31,
1999 compared to 4.1-to-1 at December 31, 1998. The modest increase in working
capital between years is primarily the result of the Company's focus on
efficient management of individual working capital components.
At December 31, 1999, long-term debt totaled $535.1 million compared to
$589.2 million at December 31, 1998. The decrease in indebtedness was funded by
cash flow from operations. The Company's debt-to-capitalization ratio was 53.0%
at December 31, 1999 compared to 58.8% at December 31, 1998.
Financing Arrangements
To meet short-term capital and other financial requirements, the Company
maintains a $600.0 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 December 31, 1999, there were $317.5 million of cash
borrowings outstanding under the revolving credit facility and $39.8 million in
letters of credit outstanding, leaving an excess of $242.7 million available
under the revolving credit facility.
The Company believes its Secured Credit Agreement, together with cash
generated from operations, will be adequate to meet liquidity requirements for
the foreseeable future.
Recently Issued Statements of Financial Accounting Standards
In June, 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133) "Accounting for Derivative
Instruments and Hedging Activities." This statement standardized the accounting
for derivative instruments by requiring that an entity recognize the items as
assets and liabilities in the statement of financial position and measure them
at fair value. SFAS No. 133 was to become effective for fiscal years beginning
after June 15, 1999; however, in June, 1999 Statement of Financial Accounting
Standards No. 137 was issued extending the effective date to June 15, 2000. The
company does not believe the adoption of this statement will have a material
impact on its financial statements.
Forward-Looking Statements
From time to time, the Company may make statements which constitute or
contain "forward-looking" information as that term is defined in the Private
Securities Litigation Reform Act of 1995 or by the Securities and Exchange
Commission in its rules, regulations, and releases. The Company cautions
investors that any such forward-looking statements made by the Company are not
guarantees of future performance and that actual results may differ materially
from those in the forward-looking statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
The Company is exposed to market risk from changes in interest rates. The
Company's exposure to interest rate risk consists of its floating rate Secured
Credit Agreement. Interest rate swaps are used to reduce the Company's exposure
to increases in interest rates.
<PAGE>
Item 8. Financial Statements and Supplementary Data
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
(Dollars in thousands) December 31, December 31,
1999 1998
- --------------------------------------------------------------------------------
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 7,409 $ 13,220
Receivables, less allowances of $19,057
($18,333 at December 31, 1998) 345,385 324,164
Inventories (Note 3) 285,395 307,382
Prepaid expenses and other current assets 33,711 31,107
- --------------------------------------------------------------------------------
Total current assets 671,900 675,873
Property, plant and equipment:
Land 18,930 16,757
Buildings and improvements 204,177 188,874
Machinery and equipment 322,527 294,282
- --------------------------------------------------------------------------------
545,634 499,913
Less accumulated depreciation 247,888 206,136
- --------------------------------------------------------------------------------
Net property, plant and equipment 297,746 293,777
Intangible assets (Note 4) 303,446 316,998
Other assets 15,742 16,556
- --------------------------------------------------------------------------------
$1,288,834 $1,303,204
================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 73,617 $ 67,381
Accrued employee compensation 28,450 35,758
Accrued interest expense 1,762 5,608
Other accrued expenses 50,035 57,978
- --------------------------------------------------------------------------------
Total current liabilities 153,864 166,725
Long-term debt (Note 5) 535,100 589,200
Other long-term liabilities 125,673 133,770
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 52,277,066
shares at December 31, 1999 and 1998 (Note 6) 52,277 52,277
Paid-in capital 120,326 127,513
Retained earnings 356,572 244,662
Treasury stock at cost
(2,907,059 shares at December 31, 1999 and
525,000 shares at December 31, 1998) (54,978) (10,943)
- --------------------------------------------------------------------------------
Total shareholders' equity 474,197 413,509
- --------------------------------------------------------------------------------
$1,288,834 $1,303,204
================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------
(Dollars in thousands except per share data)
Year Ended December 31,
----------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,088,112 $1,960,250 $1,808,276
Costs and expenses:
Cost of operations 1,498,622 1,406,434 1,319,455
Selling, general and administrative expenses 321,205 314,837 286,086
Depreciation and amortization (includes
$13,155, $13,670 and $16,369 related to
fair value adjustments) 56,528 55,469 55,995
- ------------------------------------------------------------------------------------------------
Earnings from operations 211,757 183,510 146,740
Interest expense 37,577 43,455 42,747
Other income, net 2,584 12,088 3,261
- ------------------------------------------------------------------------------------------------
Earnings before income tax expense 176,764 152,143 107,254
Income tax expense (Note 7) 64,854 54,205 40,201
- ------------------------------------------------------------------------------------------------
Net earnings $ 111,910 $ 97,938 $ 67,053
================================================================================================
Net earnings per common share - basic (Note 6) $ 2.20 $ 1.88 $ 1.19
================================================================================================
Net earnings per common share - diluted (Note 6) $ 2.14 $ 1.82 $ 1.15
================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------------
(Dollars in thousands)
Year Ended December 31,
----------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net earnings $111,910 $ 97,938 $ 67,053
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation of property, plant and equipment 44,468 43,409 43,935
Amortization of intangible and other assets 12,060 12,060 12,060
Noncash interest and other expense 2,172 2,107 1,297
Increase in receivables (21,221) (30,189) (10,558)
(Increase) decrease in inventories 21,987 (20,336) (5,939)
(Increase) decrease in prepaid expenses and
intangible and other assets (2,872) (3,055) 3,655
Increase (decrease) in accounts payable, accrued
interest expense and other accrued expenses (12,861) 29,704 (7,405)
Increase (decrease)in net deferred tax liabilities (5,390) 2,624 (8,056)
Increase (decrease) in other long-term
liabilities (1,687) (2,956) 7,669
- ------------------------------------------------------------------------------------------------
Net cash provided by operating activities 148,566 131,306 103,711
- ------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from the disposal of assets 451 1,233 732
Additions to property, plant and equipment (48,951) (44,358) (40,004)
- -------------------------------------------------------------------------------------------------
Net cash used by investing activities (48,500) (43,125) (39,272)
- -------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments for debt issuance costs - (1,684) (3,342)
Additions to long-term debt - 218,000 220,000
Payments of long-term debt (54,100) (295,800) (124,800)
Proceeds from the issuance of common stock - 3,192 10,734
Payment for the repurchase and retirement
of common stock - - (168,056)
Proceeds from the issuance of treasury stock 7,943 - -
Purchase of treasury stock (59,720) (10,943) -
Payments for the repurchase of common stock warrants - - (5,187)
Payments for common stock offering expenses
of selling shareholders - - (879)
- -------------------------------------------------------------------------------------------------
Net cash used by financing activities (105,877) (87,235) (71,530)
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (5,811) 946 (7,091)
Cash and cash equivalents at beginning of period 13,220 12,274 19,365
- -------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 7,409 $ 13,220 $ 12,274
=================================================================================================
Supplemental Disclosure:
Cash payments for income taxes, net $ 68,100 $ 49,889 $ 40,639
=================================================================================================
Cash payments for interest $ 40,070 $ 42,974 $ 40,707
=================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------
(Dollars in thousands) Common Paid-In Retained Treasury
Stock Capital Earnings Stock Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1996 $61,432 $278,554 $79,671 $ - $419,657
Net earnings 67,053 67,053
Common stock activity:
Repurchase of common stock
- 10,842,299 shares (10,842) (157,214) (168,056)
Stock plans activity (Note 6) 174 1,302 1,476
Warrant exercises - 1,298,498 shares 1,298 7,960 9,258
Warrant purchases - 650,071 shares (5,187) (5,187)
Retirement of common stock
- 58,824 shares (59) 59 -
Common stock offering expenses of
selling shareholders (879) (879)
- ------------------------------------------------------------------------------------------------
Balance December 31, 1997 52,003 124,595 146,724 - 323,322
Net earnings 97,938 97,938
Common stock activity:
Stock plans activity (Note 6) 274 2,918 3,192
Purchase of treasury stock
- 525,000 shares (10,943) (10,943)
- -------------------------------------------------------------------------------------------------
Balance December 31, 1998 52,277 127,513 244,662 (10,943) 413,509
Net earnings 111,910 111,910
Common stock activity:
Stock plans activity (Note 6) (7,187) 15,685 8,498
Purchase of treasury stock
- 3,123,200 shares (59,720) (59,720)
- -------------------------------------------------------------------------------------------------
Balance December 31, 1999 $52,277 $120,326 $356,572 $(54,978) $474,197
=================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
1. The Company
Furniture Brands International, Inc. (referred to herein as the
"Company") is the largest home furniture manufacturer in the United States.
During the year ended December 31, 1999, the Company had three primary
operating subsidiaries: Broyhill Furniture Industries, Inc.; Lane Furniture
Industries, Inc.; and Thomasville Furniture Industries, Inc.
Substantially all of the Company's sales are made to unaffiliated
furniture retailers. The Company has a diversified customer base with no
one customer accounting for 10% or more of consolidated net sales and no
particular concentration of credit risk in one economic section. Foreign
operations and net sales are not material.
2. Significant Accounting Policies
The significant accounting policies of the Company are set forth
below.
Use of Estimates
The preparation of 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 and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those
estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and all its subsidiaries. All material intercompany transactions
are eliminated in consolidation. The Company's fiscal year ends on December
31. The operating companies included in the consolidated financial
statements report their results of operations as of the Saturday closest to
December 31. Accordingly, the results of operations will periodically
include a 53-week fiscal year. Fiscal years 1999, 1998, and 1997 were
52-week, 52-week and 53-week years, respectively.
Cash and Cash Equivalents
The Company considers all short-term investments with an original
maturity of three months or less to be cash equivalents. Short-term
investments are recorded at amortized cost, which approximates market.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost when acquired.
Depreciation is calculated using both accelerated and straight-line methods
based on the estimated useful lives of the respective assets, which
generally range from 3 to 45 years for buildings and improvements and from
3 to 12 years for machinery and equipment.
Intangible Assets
The excess of cost over net assets acquired in connection with the
acquisition of Thomasville totaled $93,110. This intangible asset is being
amortized on a straight-line basis over a 40-year period.
The Company emerged from Chapter 11 reorganization effective with the
beginning of business on August 3, 1992. In accordance with generally
accepted accounting principles, the Company was required to adopt
"fresh-start" reporting which included adjusting all assets and liabilities
to their fair values as of the effective date. The ongoing impact of the
adoption of fresh-start reporting is reflected in the financial statements
for all years presented.
As a result of adopting fresh-start reporting, the Company recorded
reorganization value in excess of amounts allocable to identifiable assets
of approximately $146,000. This intangible asset is being amortized on a
straight-line basis over a 20-year period.
Also in connection with the adoption of fresh-start reporting, the
Company recorded approximately $156,800 in fair value of trademarks and
trade names based upon an independent appraisal. Such trademarks and trade
names are being amortized on a straight-line basis over a 40-year period.
Long-lived assets are reviewed for impairment whenever events or
changes in business circumstances indicate the carrying value of the assets
may not be recoverable. Impairment losses are recognized if expected future
cash flows of the related assets are less than their carrying values.
Fair Value of Financial Instruments
The Company considers the carrying amounts of cash and cash
equivalents, receivables, and accounts payable to approximate fair value
because of the short maturity of these financial instruments.
Amounts outstanding under long-term debt agreements are considered to
be carried on the financial statements at their estimated fair values
because they were entered into recently and/or accrue interest at rates
which generally fluctuate with interest rate trends.
Interest rate swap agreements used by the Company to fix the interest
rate on a portion of its floating rate long-term debt are accounted for on
the accrual basis. Amounts to be paid or received under the interest rate
swap agreements are recognized in income as adjustments to interest
expense. The fair value of the interest rate swap agreements at December
31, 1999 exceeded the book value by approximately $4.4 million. The fair
value of the interest rate swap agreements is based upon market quotes from
the counterparties.
Revenue Recognition
The Company recognizes revenue when finished goods are shipped with
appropriate provisions for returns and uncollectible accounts.
Income Taxes
Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect of a change
in tax rates on deferred tax assets and liabilities is recognized in income
in the period that includes the enactment date.
Stock-Based Compensation
The Company accounts for stock-based compensation using the intrinsic
value method.
Reclassification
Certain 1998 and 1997 amounts have been reclassified to conform to the
1999 presentation.
<PAGE>
3. Inventories
Inventories are summarized as follows:
--------------------------------------------------------------------------
December 31, December 31,
1999 1998
--------------------------------------------------------------------------
Finished products $112,389 $122,993
Work-in-process 58,479 57,915
Raw materials 114,527 126,474
--------------------------------------------------------------------------
$285,395 $307,382
==========================================================================
4. Intangible Assets
Intangible assets include the following:
--------------------------------------------------------------------------
December 31, December 31,
1999 1998
--------------------------------------------------------------------------
Intangible assets, at cost:
Reorganization value in excess of amounts
allocable to identifiable assets $146,063 $146,063
Trademarks and trade names 156,828 156,828
Excess of cost over net assets acquired 93,110 93,110
--------------------------------------------------------------------------
396,001 396,001
Less accumulated amortization 92,555 79,003
==========================================================================
$303,446 $316,998
5. Long-Term Debt
Long-term debt consists of the following:
--------------------------------------------------------------------------
December 31, December 31,
1999 1998
--------------------------------------------------------------------------
Secured credit agreement:
Revolving credit facility $317,500 $370,000
Term loan facility 200,000 200,000
Other 17,600 19,200
--------------------------------------------------------------------------
$535,100 $589,200
==========================================================================
The following discussion summarizes certain provisions of the long-term
debt.
Secured Credit Agreement
The Secured Credit Agreement consists of a revolving credit facility and a
term loan facility. The revolving credit facility is a five-year facility
with a commitment of $600,000. The revolving credit facility allows for
issuance of letters of credit and cash borrowings. Letter of credit
outstandings are limited to no more than $60,000, with cash borrowings
limited only by the facility's maximum availability less letters of credit
outstanding.
Under the letter of credit facility, a fee of 0.875% per annum
(subject to reduction based upon the Company achieving certain leverage
ratios) is assessed for the account of the lenders ratably. A further fee
of 0.125% is assessed on standby letters of credit representing a facing
fee. A customary administrative charge for processing letters of credit is
also payable to the relevant issuing bank.
Letter of credit fees are payable quarterly in arrears.
Cash borrowings under the revolving credit facility bear interest at a
base rate or at an adjusted London Interbank Offered Rate (LIBOR) plus an
applicable margin which varies, depending upon the type of loan the Company
executes. The applicable margin over the base rate and LIBOR is subject to
adjustment based upon achieving certain leverage ratios. At December 31,
1999 loans outstanding under the revolving credit facility consisted of
$310,000 based on the LIBOR rate and $7,500 based on the base rate, for a
weighted average interest rate of 7.04%.
At December 31, 1999, there were $317,500 of cash borrowings and
$39,789 in letters of credit outstanding under the revolving credit
facility, leaving an excess of $242,711 available under the facility.
The revolving credit facility has no mandatory principal payments;
however, the commitment matures on September 15, 2001. In addition, the
facility requires principal payments from a portion of the net proceeds
realized from (i) the sale, conveyance or other disposition of collateral
securing the debt, or (ii) the sale by the Company for its own account of
additional subordinated debt and/or shares of its preferred and/or common
stock.
On June 27, 1997, the Company amended the Secured Credit Agreement to
include a new term loan facility of $200,000. The term loan facility is a
non-amortizing ten-year facility, bearing interest at a base rate plus
0.75% or at an adjusted LIBOR rate plus 1.75%, depending upon the type of
loan the Company executes. At December 31, 1999, all loans outstanding
under the term loan facility were based on the LIBOR rate at an interest
rate of 8.31%.
The common stock of the Company's principal subsidiaries and the
accounts receivable and inventories of the subsidiaries have been pledged
as security for the Secured Credit Agreement. The Secured Credit Agreement
defines events of default and contains a number of restrictive covenants,
including covenants limiting capital expenditures and incurrence of debt,
and requiring the Company to achieve certain financial ratios, some of
which become more restrictive over time.
Other
Other long-term debt consists of various industrial revenue bonds with
interest rates ranging from approximately 4.0% to 9.0%. Mandatory principal
payments are required through 2008.
Interest Rate Swap Agreements
The Company has entered into various interest rate swap agreements to
reduce the impact of changes in interest rates on its floating rate
long-term debt. The following table summarizes the terms of the interest
rate swap agreements in effect during 1999.
Notional Amount Maturity Date Fixed Rate Floating Rate
---------------------------------------------------------------------------
$100,000 February 1999 5.14% 3-month LIBOR
$200,000 February 1999 5.14% 3-month LIBOR
$300,000 January 2002 5.50% 3-month LIBOR
In June 1999, the Company executed a partial unwind of $100,000 of the
$300,000 swap agreement maturing in January 2002. The gain from the
transaction is being amortized over the remaining life of the swap. The
swap agreements effectively convert a portion of the Company's floating
rate long-term debt to a fixed rate. The Company pays the counterparties
the fixed rate and receives payments based upon the floating rate. The
Company is exposed to credit loss in the event of nonperformance by the
counterparties; however, nonperformance is not anticipated.
Other Information
Maturities of long-term debt are $0, $317,500, $0, $0, and $0 for
years 2000 through 2004, respectively.
6. Common Stock
The Company's restated certificate of incorporation includes
authorization to issue up to 100.0 million shares of common stock with a
$1.00 per share stated value. As of December 31, 1999, 52,277,066 shares of
common stock were issued and outstanding. It is not presently anticipated
that dividends will be paid on common stock in the foreseeable future and
certain of the debt instruments to which the Company is a party restrict
the payment of dividends.
Since October 1998, the Board of Directors has authorized the
repurchase of up to $105,000 of the Company's common stock with the latest
authorization expiring in September 2000. As of December 31, 1999, the
Company has repurchased 3,648,200 shares for $70,663.
<PAGE>
Shares of common stock were reserved for the following purposes at
December 31, 1999:
---------------------------------------------------------------------------
Number
of Shares
---------------------------------------------------------------------------
Common stock options:
Granted 4,027,063
Available for grant 2,330,986
---------------------------------------------------------------------------
6,358,049
===========================================================================
On April 29, 1999, stockholders approved the 1999 Long-Term Incentive
Plan. The plan provided for a total of 2,250,000 shares plus all remaining
shares available for grant or which become available for grant due to
cancellation under the 1992 Stock Option Plan. The plan is administered by
the Executive Compensation and Stock Option Committee of the Board of
Directors and permits certain key employees to be granted nonqualified
options, performance-based options, restricted stock, or combinations
thereof. Options must be issued at market value on the date of grant and
expire in a maximum of ten years.
In 1999, the Company granted 79,000 shares of restricted stock. The
restricted shares vest over various periods from 2 to 5 years. The deferred
compensation expense is amortized to expense over the period of time the
restrictions are in place and the unamortized portion is classified as a
reduction of paid-in-capital in the Company's Consolidated Balance Sheets.
Changes in options granted and outstanding are summarized as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Year Ended December 31,
1999 1998 1997
------------------ -------------------- ---------------------
Average Average Average
Shares Price Shares Price Shares Price
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of period 4,018,581 $ 9.37 3,897,930 $ 7.48 3,859,476 $ 6.63
Granted 772,600 23.49 436,500 23.02 292,500 16.36
Exercised (662,141) 6.02 (273,546) 4.81 (173,964) 3.93
Cancelled (101,977) 7.91 (42,303) 5.56 (80,082) 6.62
---------------------------------------------------------------------------------------------------
End of period 4,027,063 $12.67 4,018,581 $ 9.37 3,897,930 $ 7.48
===================================================================================================
Exercisable at
end of period 2,342,822 2,261,639 1,979,287
===================================================================================================
Weighted average fair
value of options granted $13.03 $11.04 $ 7.54
===================================================================================================
</TABLE>
Had compensation cost for the Company's stock-based compensation plan
been determined consistent with SFAS No. 123, the Company's net earnings
and net earnings per share would have been as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Year Ended December 31,
---------------------------------------
1999 1998 1997
--------------------------------------------------------------------------------------
Net earnings
<S> <C> <C> <C>
As reported $ 111,910 $97,938 $67,053
Pro forma 108,600 96,180 65,907
Net earnings per share - basic
As reported $ 2.20 $ 1.88 $ 1.19
Pro forma 2.13 1.85 1.17
Net earnings per share - diluted
As reported $ 2.14 $ 1.82 $ 1.15
Pro forma 2.10 1.80 1.13
======================================================================================
</TABLE>
The weighted average fair value of options granted is estimated as of
the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions: risk free interest rate of 5.00%,
5.50%, and 6.00% in 1999, 1998, and 1997, respectively; expected dividend
yield of 0% for all years; expected life of 7 years for all years and
expected volatility of 46%, 35%, and 30% for 1999, 1998, and 1997,
respectively.
<PAGE>
Summarized information regarding stock options outstanding and
exercisable at December 31, 1999 follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Outstanding Exercisable
------------------------------------- ------------------------------------------------
Range of Average
Exercise Contractual Average Average
Prices Shares Life Price Shares Price
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Up to $10 1,868,663 3.3 $ 5.55 1,658,922 $ 5.35
$10 - $20 1,003,100 5.9 12.82 595,600 12.79
Over $20 1,155,300 7.7 24.06 88,300 24.66
--------------------------------------------------------------------------------------------------------------------
4,027,063 5.2 $12.67 2,342,822 $ 7.97
====================================================================================================================
</TABLE>
Weighted average shares used in the computation of basic and diluted
net earnings per common share for 1999, 1998, and 1997 are as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Year Ended December 31,
------------------------------------------
<S> <C> <C> <C>
1999 1998 1997
--------------------------------------------------------------------------------------
Weighted average shares used for
basic net earnings per common share 50,967,973 52,095,451 56,438,465
Effect of dilutive securities:
Stock options 1,366,611 1,713,515 1,447,624
Warrants - - 587,105
--------------------------------------------------------------------------------------
Weighted average shares used for
diluted net earnings per common share 52,334,584 53,808,966 58,473,194
======================================================================================
</TABLE>
Excluded from the computation of diluted net earnings per common share
were options to purchase 1,100,300 shares at an average price of $24.21 per
share during 1999.
At December 31, 1996, the Company had outstanding approximately 2.0
million warrants to purchase common stock at $7.13 per share. The warrants,
which included a five-year call protection which expired on August 3, 1997,
were redeemed on August 15, 1997.
7. Income Taxes
Income tax expense was comprised of the following:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Year Ended December 31,
---------------------------------------
<S> <C> <C> <C>
1999 1998 1997
-----------------------------------------------------------------------------------
Current:
Federal $62,108 $46,257 $43,680
State and local 8,136 5,324 4,577
-----------------------------------------------------------------------------------
70,244 51,581 48,257
Deferred (5,390) 2,624 (8,056)
-----------------------------------------------------------------------------------
$64,854 $54,205 $40,201
===================================================================================
</TABLE>
The following table reconciles the differences between the federal
corporate statutory rate and the Company's effective income tax rate:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Year Ended December 31,
---------------------------------------
<S> <C> <C> <C>
1999 1998 1997
------------------------------------------------------------------------------------
Federal corporate statutory rate 35.0% 35.0% 35.0%
State and local income taxes, net of
federal tax benefit 2.5 1.8 2.3
Amortization of excess reorganization value 1.5 1.7 2.4
Other (2.3) (2.9) (2.2)
------------------------------------------------------------------------------------
Effective income tax rate 36.7% 35.6% 37.5%
====================================================================================
</TABLE>
<PAGE>
The sources of the tax effects for temporary differences that give
rise to the deferred tax assets and liabilities were as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
December 31, December 31,
<S> <C> <C>
1999 1998
-----------------------------------------------------------------------------------
Deferred tax assets:
Expense accruals $ 17,873 $ 20,296
Valuation reserves 10,318 6,737
Employee postretirement benefits other than pensions 2,927 3,134
Inventory costs capitalized 2,757 3,429
Employee pension plans 2,121 2,139
Other 2,632 1,648
-----------------------------------------------------------------------------------
Total deferred tax assets 38,628 37,383
-----------------------------------------------------------------------------------
Deferred tax liabilities:
Fair value adjustments (71,422) (73,867)
Depreciation (8,428) (7,924)
Fair market value adjustments - accounts receivable (5,060) (7,421)
Other (10,484) (10,327)
-----------------------------------------------------------------------------------
Total deferred tax liabilities (95,394) (99,539)
-----------------------------------------------------------------------------------
Net deferred tax liabilities $(56,766) $(62,156)
===================================================================================
</TABLE>
The net deferred tax liabilities are included in the consolidated
balance sheets as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
December 31, December 31,
<S> <C> <C>
1999 1998
--------------------------------------------------------------------------------
Prepaid expenses and other current assets $ 25,605 $ 24,914
Other long-term liabilities (82,371) (87,070)
--------------------------------------------------------------------------------
$(56,766) $(62,156)
================================================================================
</TABLE>
8. Employee Benefits
The Company sponsors or contributes to retirement plans covering
substantially all employees. The total cost of all plans for 1999, 1998,
and 1997 was $5,649, $7,773, and $8,412, respectively.
Company-Sponsored Defined Benefit Plans
Annual cost for defined benefit plans is determined using the
projected unit credit actuarial method. Prior service cost is amortized on
a straight-line basis over the average remaining service period of
employees expected to receive benefits.
It is the Company's practice to fund pension costs to the extent that
such costs are tax deductible and in accordance with ERISA. The assets of
the various plans include corporate equities, government securities,
corporate debt securities and insurance contracts. The table below
summarizes the funded status of the Company-sponsored defined benefit
plans.
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
December 31, December 31,
<S> <C> <C>
1999 1998
--------------------------------------------------------------------------------
Change in projected benefit obligation:
Projected benefit obligation - beginning of year $284,498 $273,487
Service cost 8,379 7,419
Interest cost 21,905 19,856
Actuarial loss 17,204 168
Benefits paid (17,166) (16,432)
Other (1,064) -
--------------------------------------------------------------------------------
Projected benefit obligation - end of year $313,756 $284,498
--------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets - beginning of year $332,541 $306,797
Actual return on plan assets 44,731 41,591
Employer contributions 687 585
Benefits paid (17,166) (16,432)
Other 1,097 -
--------------------------------------------------------------------------------
Fair value of plan assets - end of year $361,890 $332,541
--------------------------------------------------------------------------------
Funded status $ 48,134 $ 48,043
Unrecognized net gain (49,006) (49,236)
Unrecognized prior service cost 1,480 975
--------------------------------------------------------------------------------
Prepaid (accrued) pension cost $ 608 $ (218)
================================================================================
</TABLE>
Net periodic pension cost for 1999, 1998, and 1997 included the
following components:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Year Ended December 31,
--------------------------------
1999 1998 1997
-----------------------------------------------------------------------------------
Service cost-benefits earned during the period $ 8,379 $ 7,419 $ 7,120
Interest cost on the projected benefit obligation 21,905 19,856 19,026
Expected return on plan assets (29,193) (25,464) (23,115)
Net amortization and deferral (1,230) (224) 212
-----------------------------------------------------------------------------------
Net periodic pension expense (income) $ (139) $ 1,587 $ 3,243
===================================================================================
</TABLE>
Employees are covered primarily by noncontributory plans, funded by
Company contributions to trust funds, which are held for the sole benefit
of employees. Monthly retirement benefits are based upon service and pay
with employees becoming vested upon completion of five years of service.
The expected long-term rate of return on plan assets was 9.0% in 1999
and 8.5% in 1998 and 1997. Measurement of the projected benefit obligation
was based upon a weighted average discount rate of 7.25% and a long-term
rate of compensation increase of 4.5% for all years presented.
Other Retirement Plans and Benefits
In addition to defined benefit plans, the Company makes contributions
to defined contribution plans and sponsors employee savings plans. The cost
of these plans is included in the total cost for all plans reflected above.
9. Commitments and Contingent Liabilities
Certain of the Company's real properties and equipment are operated
under lease agreements. Rental expense under operating leases totaled
$17,417, $16,537 and $15,699 for 1999, 1998, and 1997, respectively. Annual
minimum payments under operating leases are $13,928, $11,043, $9,586,
$8,286, and $6,401 for 2000 through 2004, respectively.
The Company has provided guarantees related to store leases for
certain independent dealers opening Thomasville Home Furnishings Stores.
The total future lease payments guaranteed at December 31, 1999 were
$20,157.
The Company is or may become a defendant in a number of pending or
threatened legal proceedings in the ordinary course of business. In the
opinion of management, the ultimate liability, if any, of the Company from
all such proceedings will not have a material adverse effect upon the
consolidated financial position or results of operations of the Company and
its subsidiaries.
10. Quarterly Financial Information (Unaudited)
Following is a summary of unaudited quarterly information:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
----------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1999:
<S> <C> <C> <C> <C>
Net sales $521,169 $512,980 $520,061 $533,902
Gross profit 135,706 134,679 138,236 141,691
Net earnings $ 29,151 $ 27,460 $ 27,592 $ 27,707
Net earnings per common share:
Basic $ 0.59 $ 0.53 $ 0.54 $ 0.54
Diluted $ 0.58 $ 0.52 $ 0.52 $ 0.52
Common stock price range:
High $ 22.00 $ 27.50 $ 27.88 $ 27.88
Low $ 17.44 $ 17.06 $ 19.63 $ 20.94
=======================================================================================================================
Year ended December 31, 1998:
Net sales $497,628 $487,178 $470,146 $505,298
Gross profit 130,996 128,258 125,435 130,823
Net earnings $ 24,669 $ 30,548 $ 21,107 $ 21,614
Net earnings per common share:
Basic $ 0.48 $ 0.58 $ 0.40 $ 0.41
Diluted $ 0.46 $ 0.57 $ 0.39 $ 0.40
Common stock price range:
High $ 27.25 $ 30.69 $ 33.69 $ 32.56
Low $ 13.50 $ 19.50 $ 23.06 $ 19.56
======================================================================================================================
</TABLE>
The Company has not paid cash dividends on its common stock during the
three years ended December 31, 1999. The closing market price of the
Company's common stock on December 31, 1999 was $22.00 per share.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- --------------------------------------------------------------------------------
Financial Disclosure
- --------------------
Not applicable
<PAGE>
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
The section entitled "Nominees" of the Company's Definitive Proxy Statement
for the Annual Meeting of Stockholders on April 27, 2000 is incorporated herein
by reference.
<TABLE>
<CAPTION>
Executive Officers of the Registrant
Current Appointed
<S> <C> <C> <C> <C>
Name Age Position Positions or Elected
---- --- -------- --------- ----------
*Wilbert G. Holliman 62 President of the Subsidiary -
Action Industries, Inc. 1989
Chief Executive Officer of
the Subsidiary - Action
Industries, Inc. 1994
Director X 1996
President X 1996
Chief Executive Officer X 1996
Chairman of the Board X 1998
*Richard B. Loynd 72 Chairman of the Board of the
Former Subsidiary - Converse Inc. 1982
Vice-President 1987
Director X 1987
President 1989
Chief Operating Officer 1989
Chief Executive Officer 1989
Chairman of the Board 1990
Chairman of the Executive
Committee X 1998
John T. Foy 52 President and Chief Executive
Officer of the Subsidiary -
Action Industries, Inc. X 1996
Christian J. Pfaff 51 President and Chief Executive
Officer of the Subsidiary -
Thomasville Furniture Industries,
Inc. X 1997
Dennis R. Burgette 52 President and Chief Executive
Officer of the Subsidiary -
Broyhill Furniture Industries,
Inc. X 1999
Lynn Chipperfield 48 General Counsel 1993
Vice-President 1996
Secretary X 1996
Senior Vice President X 2000
Chief Administrative Officer X 2000
David P. Howard 49 Controller 1990
Vice-President X 1991
Chief Financial Officer X 1994
Treasurer X 1996
Steven W. Alstadt 45 Controller X 1994
Chief Accounting Officer X 1994
<PAGE>
Retired as an officer of the Company on December 31, 1998.
Brent B. Kincaid 67 President and Chief Executive
Officer of the Subsidiary -
Broyhill Furniture Industries, Inc. 1992
Director 1997
- -------------------------
* Member of the Executive Committee
</TABLE>
There are no family relationships between any of the executive officers of the
Registrant.
The executive officers are elected at the organizational meeting of the Board of
Directors which follows the annual meeting of stockholders and serve for one
year and until their successors are elected and qualified.
Each of the executive officers has held the same position or other positions
with the same employer during the past five years.
Item 11. Executive Compensation
- --------------------------------
The sections entitled "Executive Compensation", "Executive Compensation and
Stock Option Committee Report on Executive Compensation", "Compensation
Committee Interlocks and Insider Participation", "Stock Options", "Retirement
Plans", "Incentive Agreements" and "Performance Graph" of the Company's
Definitive Proxy Statement for the Annual Meeting of Stockholders on April 27,
2000 are incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
The section entitled "Security Ownership" of the Company's Definitive Proxy
Statement for the Annual Meeting of Stockholders on April 27, 2000, is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
None.
<PAGE>
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- --------------------------------------------------------------------------
(a) List of documents filed as part of this report:
1. Financial Statements:
Consolidated balance sheets, December 31, 1999 and 1998
Consolidated statements of operations for each of the years in
the three-year period ended December 31, 1999
Consolidated statements of cash flows for each of the years in
the three-year period ended December 31, 1999
Consolidated statements of shareholders' equity for each of the
years in the three-year period ended December 31, 1999
Notes to consolidated financial statements
Independent Auditors' Report
2. Financial Statement Schedules:
Valuation and qualifying accounts (Schedule II).
All other schedules are omitted as the required information is presented in the
consolidated financial statements or related notes or are not applicable.
3. Exhibits:
3(a) Restated Certificate of Incorporation of the Company, as amended.
(Incorporated by reference to Exhibit 3(a) to Furniture Brands
International, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996.)
3(b) By-Laws of the Company revised and amended to May 6, 1998.
(Incorporated by reference to Exhibit 3(a) to Furniture Brands
International, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998.)
3(c) Rights Agreement, dated as of July 30, 1998, between the Company
and Bank of New York, as Rights Agent. (Incorporated by reference
to Exhibit 4(b) to Furniture Brands International, Inc.'s
Quarterly report on Form 10-Q for the quarter ended June 30,
1998.)
3(d) Certificate of Designations, Preferences and Rights of Series A
Junior Participating Preferred Stock of the Company.
(Incorporated by reference to Exhibit 4(c) to Furniture Brands
International, Inc.'s Report on Form 10-Q for the quarter ended
June 30, 1998.)
4(a) Credit Agreement, dated as of November 17, 1994, as amended and
restated as of December 29, 1995; September 6, 1996; June 27,
1997; and July 14, 1998 among the Company, Broyhill Furniture
Industries, Inc., Lane Furniture Industries, Inc., 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. (Incorporated by reference to Exhibit 4(a) to Furniture
Brands International, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998.)
4(b) First Amendment, dated as of November 22, 1999, to Credit
Agreement, dated as of November 17, 1994, as amended and restated
as of December 29, 1995, September 6, 1996, June 27, 1997, and
July 14, 1998 among the Company, Broyhill Furniture Industries,
Inc., Lane Furniture Industries, Inc., 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(c) Agreement to furnish upon request of the Commission copies of
other instruments defining the rights of holders of long-term
debt of the Company and its subsidiaries which debt does not
exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis. (Incorporated by reference
to Exhibit 4(c) to Furniture Brands International, Inc.'s Annual
Report on Form 10-K for the year ended February 28, 1981.)
10(a)Furniture Brands International, Inc.'s 1992 Stock Option Plan, as
amended. (Incorporated by reference to Exhibit 10(a) to Furniture
Brands International, Inc.'s Form 10-Q for the quarter ended
March 31, 1999.)
10(b)Furniture Brands International Inc.'s 1999 Long-Term Incentive
Plan (Incorporated by reference to Exhibit 10(b) to Furniture
Brands International, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999.)
10(c)Form of Indemnification Agreement between the Company and
Richard B. Loynd, Donald E. Lasater and Lee M. Liberman.
(Incorporated by reference to Exhibit 10(h) to Furniture Brands
International, Inc.'s Annual Report on Form 10-K for the year
ended February 29, 1988.)
10(d)Written description of bonus plan for management personnel of
The Lane Company, Incorporated. (Incorporated by reference to
Exhibit 10(e) to Furniture Brands International, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1995.)
10(e)Retirement Plan for directors. (Incorporated by reference to
Exhibit 10(g) to Furniture Brands International, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1994.)
10(f)First Amendment to Retirement Plan for Directors. (Incorporated
by reference to Exhibit 10(e) to Furniture Brands International,
Inc.'s Annual Report on Form 10-K for the year ended December 31,
1997.)
10(g)Furniture Brands International, Inc. Executive Incentive Plan, as
amended.
10(h)Broyhill Furniture Industries, Inc. Executive Incentive Plan.
(Incorporated by reference to Exhibit 10(i) to Furniture Brands
International, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1994.)
<PAGE>
10(i)Thomasville Furniture Industries, Inc. Executive Incentive Plan
(Incorporated by reference to Exhibit 10(j) to Furniture Brands
International, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1996.)
10(j)Employment Agreement, dated as of April 29, 1997, between Action
Industries, Inc. and John T. Foy. (Incorporated by reference to
Exhibit 10(d) to Furniture Brands International Inc.'s Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997.)
10(k)Employment Agreement, dated as of January 1, 1999, between the
Company and Wilbert G. Holliman. (Incorporated by reference to
Exhibit 10(j) to Furniture Brands International, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1998.)
10(l)Employment Agreement, dated as of August 1, 1996, between the
Company and Lynn Chipperfield. (Incorporated by reference to
Exhibit 10(c) to Furniture Brands International Inc.'s Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996.)
10(m)Employment Agreement, dated as of August 1, 1996, between the
Company and David P. Howard. (Incorporated by reference to
Exhibit 10(d) to Furniture Brands International Inc.'s Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996.)
10(n)Employment Agreement, dated as of January 1, 2000 between the
Company and Richard B. Loynd.
10(o)Employment Agreement, dated as of January 29, 1998, between
Thomasville Furniture Industries, Inc. and Christian J. Pfaff.
(Incorporated by reference to Exhibit 10(o) to Furniture Brands
International Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1997.)
10(p)Employment Agreement, dated as of January 1, 1999, between
Broyhill Furniture Industries, Inc. and Dennis R. Burgette.
(Incorporated by reference to Exhibit 10(p) to Furniture Brands
International, Inc's Annual Report on Form 10-K for the year
ended December 31, 1998.)
10(q)Form of Agreement Not To Compete between the Company and Wilbert
G. Holliman, Dennis R. Burgette, John T. Foy, Christian J. Pfaff,
David P. Howard, Lynn Chipperfield and Steven W. Alstadt.
(Incorporated by reference to Exhibit 10(r) to Furniture Brands
International, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1998.)
21 List of Subsidiaries of the Company
23 Consent of KPMG LLP
27 Financial Data Schedule
99(a)Distribution and Services Agreement, dated November 17, 1994,
between the Company and Converse Inc. (Incorporated by reference
to Exhibit 99(a) to Furniture Brands International, Inc.'s Annual
Report on Form 8-K, dated December 2, 1994.)
99(b)Tax Sharing Agreement, dated November 17, 1994, between the
Company and Converse Inc. (Incorporated by reference to Exhibit
99(b) to Furniture Brands International, Inc.'s Annual Report on
Form 8-K, dated December 2, 1994.)
99(c)Amendment to Tax Sharing Agreement, dated as of February 21,
1996, between the Company and Converse Inc. (Incorporated by
reference to Exhibit 99(e) to Furniture Brands International,
Inc.'s Annual Report on Form 10-K for the year ended December 31,
1996.)
(b) Reports on Form 8-K.
A Form 8-K was not required to be filed during the quarter ended
December 31, 1999.
SHAREHOLDERS REQUESTING COPIES OF EXHIBITS TO FORM 10-K WILL BE
SUPPLIED ANY OR ALL SUCH EXHIBITS AT A CHARGE OF TEN CENTS PER PAGE.
<PAGE>
FURNITURE BRANDS INTERNATIONAL, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedule
Page
No.
---
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1999 and 1998 18
Consolidated Statements of Operations for each of the years in the
three-year period ended December 31, 1999 19
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 1999 20
Consolidated Statements of Shareholders' Equity for each of the
years in the three-year period ended December 31, 1999 21
Notes to Consolidated Financial Statements 22
Financial Statement Schedule 33
Independent Auditors' Report 39
Consolidated Financial Statement Schedules:
Schedule
Valuation and qualifying accounts II 38
<PAGE>
<TABLE>
<CAPTION>
Schedule II
-----------
FURNITURE BRANDS INTERNATIONAL, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Additions
Balance at Charged to Deductions Balance at
Beginning Costs and from End of
Description of Period Expenses Reserves Period
- ----------- ---------- ----------- ---------- ----------
Year Ended December 31, 1999
- -----------------------------
Allowances deducted from
receivables on balance sheet:
Allowance for doubtful accounts $15,293 $ 2,362 $(1,695) (a) $15,960
Allowance for cash discounts/
chargebacks 3,040 1,364 (1,307) (b) 3,097
------- ------- ------- -------
$18,333 $ 3,726 $(3,002) $19,057
======= ======= ======= =======
Year Ended December 31, 1998
- -----------------------------
Allowances deducted from
receivables on balance sheet:
Allowance for doubtful accounts $11,765 $ 5,054 $ (1,526) (a) $15,293
Allowance for cash discounts/
chargebacks 2,028 1,555 (543) (b) 3,040
------- ------- -------- -------
$13,793 $ 6,609 $ (2,069) $18,333
======= ======= ======== =======
Year Ended December 31, 1997
- -----------------------------
Allowances deducted from
receivables on balance sheet:
Allowance for doubtful accounts $17,054 $ 5,098 $(10,387) (a) $11,765
Allowance for cash discounts/
chargebacks 2,070 754 (796) (b) 2,028
------- ------- -------- -------
$19,124 $ 5,852 $(11,183) $13,793
======= ======= ======== =======
(a) Uncollectible accounts written off, net of recoveries.
(b) Cash discounts taken by customers and claims allowed to customers.
See accompanying independent auditors' report.
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Furniture Brands International, Inc.:
We have audited the accompanying consolidated balance sheets of
Furniture Brands International, Inc. and subsidiaries as of December 31,
1999 and 1998, and the related consolidated statements of operations,
shareholders' equity, cash flows, and the related financial statement
schedule for each of the years in the three-year period ended December 31,
1999. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Furniture Brands International, Inc. and subsidiaries as of December 31,
1999 and 1998, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1999, in
conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth
therein.
KPMG LLP
St. Louis, Missouri
January 27, 2000
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 /s/ Wilbert G. Holliman
---------------------------
Chairman of the Board,
President and Chief
Executive Officer
Date: March 28, 2000
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 28, 2000.
Signature Title
--------- -----
/s/ Wilbert G. Holliman President and Director
(Wilbert G. Holliman) (Principal Executive Officer)
/s/ Katherine Button Bell Director
(Katherine Button Bell)
/s/ Bruce A. Karsh Director
(Bruce A. Karsh)
/s/ Donald E. Lasater Director
(Donald E. Lasater)
/s/ Lee M. Liberman Director
(Lee M. Liberman)
/s/ Richard B. Loynd Director
(Richard B. Loynd)
/s/ Malcolm Portera Director
(Malcolm Portera)
/s/ Albert E. Suter Director
(Albert E. Suter)
<PAGE>
Signature Title
--------- -----
/s/ David P. Howard Vice-President and Treasurer
(David P. Howard) (Principal Financial Officer)
/s/ Steven W. Alstadt Controller
(Steven W. Alstadt) (Principal Accounting Officer)
Exhibit 4(b)
FIRST AMENDMENT
FIRST AMENDMENT (this "Amendment"), dated as of November 22, 1999, among
FURNITURE BRANDS INTERNATIONAL, INC., a Delaware corporation ("Furniture
Brands"), BROYHILL FURNITURE INDUSTRIES, INC., a North Carolina corporation
("Broyhill"), LANE FURNITURE INDUSTRIES, INC., a Delaware corporation ("Lane"),
THOMASVILLE FURNITURE INDUSTRIES, INC., a Delaware corporation ("Thomasville"
and together with Furniture Brands, Broyhill and Lane, each a "Borrower", and
collectively, the "Borrowers"), the lending institutions party to the Credit
Agreement referred to below (each a "Bank" and, collectively, the "Banks"),
CREDIT LYONNAIS CHICAGO BRANCH, as Documentation Agent (the "Documentation
Agent"), NATIONSBANK, N.A., as Syndication Agent (the "Syndication Agent"), and
BANKERS TRUST COMPANY, as Administrative Agent (the "Administrative Agent"). All
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings provided such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, the Borrowers, the Banks, the Documentation Agent, the Syndication
Agent and the Administrative Agent are party to a Credit Agreement, dated as of
November 17, 1994, as amended and restated as of December 29, 1995, as further
amended and restated as of September 6, 1996, as further amended and restated as
of June 27, 1997, and as further amended and restated as of July 14, 1998 (as
amended, modified and supplemented prior to the date hereof, the "Credit
Agreement"); and
WHEREAS, the Borrowers have requested that the Banks provide the amendment
provided for herein and the Banks have agreed to provide such amendment on the
terms and conditions set forth herein;
NOW, THEREFORE, it is agreed:
1. Section 9.04 of the Credit Agreement is hereby amended by deleting the
figure "$25,000,000" appearing at the end of clause (viii) thereof and inserting
in lieu thereof the figure "$125,000,000".
2. In order to induce the Banks to enter into this Amendment, the Borrowers
hereby represent and warrant that (i) no Default or Event of Default exists as
of the First Amendment Effective Date (as defined below) after giving effect to
this Amendment and (ii) on the First Amendment Effective Date, both before and
after giving effect to this Amendment, all representations and warranties
contained in the Credit Agreement and in the other Credit Documents are true and
correct in all material respects, except to the extent such representations and
warranties expressly relate to an earlier date, in which case such
representations and warranties are true and correct in all material respects as
of such earlier date.
3. This Amendment shall become effective on the date (the "First Amendment
Effective Date") when the Borrowers and the Required Banks shall have signed a
counterpart hereof (whether the same or different counterparts) and shall have
delivered (including by way of facsimile transmission) the same to the
Administrative Agent at its Notice Office.
4. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
5. This Amendment may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which counterparts
when executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument. A complete set of counterparts
shall be lodged with each of the Borrowers and the Administrative Agent.
6. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
* * *
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Amendment to be duly executed and delivered as of the date hereof.
FURNITURE BRANDS INTERNATIONAL, INC.
By: /s/ David P. Howard
Name: David P. Howard
Title: Vice President
<PAGE>
BROYHILL FURNITURE INDUSTRIES, INC.
By: /s/ David P. Howard
Name: David P. Howard
Title: Vice President
<PAGE>
LANE FURNITURE INDUSTRIES, INC.
By: /s/ David P. Howard
Name: David P. Howard
Title: Vice President
<PAGE>
THOMASVILLE FURNITURE INDUSTRIES, INC.
By: /s/ David P. Howard
Name: David P. Howard
Title: Vice President
<PAGE>
BANKERS TRUST COMPANY, Individually
and as Administrative Agent
By: /s/ Susan L. LeFevre
Title: Director
<PAGE>
NATIONSBANK, N.A., Individually and
as Syndication Agent
By: /s/ Natalie E. Hebert
Title: Vice President
<PAGE>
CREDIT LYONNAIS CHICAGO BRANCH, Individually
and as Documentation Agent
By: /s/ Lee E. Greve
Title: First Vice President
<PAGE>
ALLIED IRISH BANK PLC, acting through
its Cayman Island Branch
By: /s/ Germaine Reusch
Title: Vice President
By: /s/ William J. Strickland
Title: Executive Vice Present
<PAGE>
BANK OF MONTREAL
By: /s/ Monica M. Banar
Title: Director
<PAGE>
THE BANK OF NEW YORK
By: /s/ David G. Shedd
Title: Vice President
<PAGE>
THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. Ashby
Title: Senior Manager Loan Operations
<PAGE>
BANK OF SCOTLAND
By: /s/ Annie Glynn
Title: Senior Vice President
<PAGE>
THE BANK OF TOKYO - MITSUBISHI, LTD.,
CHICAGO BRANCH
By: /s/ Hisashi Miyashiro
Title: Deputy General Manager
<PAGE>
CHIAO TUNG BANK CO., LTD.
NEW YORK AGENCY
By: /s/ Kuang Si Shiu
Title: SVP & GM
<PAGE>
CIBC INC.
By: /s/ Katherine Bass
Title: Executive Director
CIBC World Markets Corp., as agent
<PAGE>
CITY NATIONAL BANK
By: /s/
<PAGE>
CREDIT AGRICOLE INDOSUEZ
By: Raymond A. Falkenberg
Title: Vice President, Senior Relationship
Manager
By: /s/ David Bouhl
Title: First Vice President, Managing Director
<PAGE>
BEDFORD CDO, LIMITED
By: Pacific Investment Management Company,
as its Investment Advisor
By: /s/
Title:
<PAGE>
CAPTIVA III FINANCE, LTD.
By: /s/
Title:
<PAGE>
CAPTIVA IV FINANCE, LTD.
By: /s/
Title:
<PAGE>
EATON VANCE INSTITUTIONAL SENIOR LOAN
By: /s/
Title:
<PAGE>
EATON VANCE SENIOR INCOME TRUST
By: /s/
Title:
<PAGE>
SENIOR DEBT PORTFOLIO
By: Boston Management and Research
as Investment Advisor
By: /s/
Title:
<PAGE>
FIRST AMERICAN NATIONAL BANK
By: /s/ Jerry Watterworth
Title: Senior Vice President
<PAGE>
FIRST COMMERCIAL BANK
(Incorporated in Taiwan, R.O.C.)
Los Angeles Branch
By: /s/ June Shiong Lu
Title: S.V.P. & General Manager
<PAGE>
FIRST UNION NATIONAL BANK (F/K/A
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA)
By: /s/ David Silander
Title: Vice President
<PAGE>
FLEET NATIONAL BANK
By: /s/ J. Lynett
Title: SVP
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/
Title:
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/
Title:
<PAGE>
KZH LANGDALE LLC
By: /s/ Peter Chin
Title: Authorized Agent
<PAGE>
MERCANTILE BANK NATIONAL ASSOCIATION
By: /s/
Title:
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/ Francoise Berthelot
Title: Vice President
<PAGE>
NATIONAL CITY BANK
By: /s/
Title:
<PAGE>
OXFORD STRATEGIC INCOME FUND
By: /s/
Title:
<PAGE>
THE MITSUBISHI TRUST AND BANKING CORPORATION
By: /s/
Title:
<PAGE>
OCTAGON LOAN TRUST, by Octagon
Credit Investors, as Manager
By: /s/
Title:
<PAGE>
PARIBAS
By: /s/
Title:
By: /s/
Title:
<PAGE>
THE SANWA BANK, LTD., CHICAGO BRANCH
By: /s/
Title:
<PAGE>
THE SUMITOMO BANK, LIMITED,
CHICAGO BRANCH
By: /s/ John H. Kemper
Title: Senior Vice President
<PAGE>
SUNTRUST BANK, ATLANTA
By: /s/ Linda L. Dash
Title: Vice President
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
By: /s/
Title:
<PAGE>
VAN KAMPEN
PRIME RATE INCOME TRUST
By: Van Kampen Investment Advisory Corp.
By: /s/ Darvin D. Pierce
Title: Vice President
<PAGE>
VAN KAMPEN CLO I, LIMITED
By: Van Kampen Management Inc.,
as Collateral Manger
By: /s/ Darvin D. Pierce
Title: Vice President
<PAGE>
VAN KAMPEN CLO II, LIMITED
By: Van Kampen Management Inc.,
as Collateral Manger
By: /s/ Darvin D. Pierce
Title: Vice President
Exhibit 21
List of Subsidiaries
Of
Furniture Brands International, Inc.
Jurisdiction of
Name of Subsidiary Incorporation
------------------ ---------------
Action Transport, Inc. Delaware
Action Industries, Inc. Mississippi
Broyhill Furniture Industries, Inc. North Carolina
Broyhill Transport, Inc. North Carolina
Fayette Enterprises, Inc. Mississippi
Lane Advertising, Inc. Virginia
Lane Furniture Industries, Inc. Delaware
The Lane Company, Incorporated Virginia
Thomasville Furniture Industries, Inc. Delaware
Thomasville Furniture Latin America, S.A. Panama
Thomasville Home Furnishings, Inc. Delaware
Furniture Brands Export Co., Ltd. Barbados
Exhibit 10(g)
FURNITURE BRANDS
EXECUTIVE INCENTIVE PLAN
February 1995
Amended March 1, 1996
Amended September 26, 1996
Amended February 24, 1997
Amended April 29, 1999
<PAGE>
TABLE OF CONTENTS
INTRODUCTION................................................................ 1
OBJECTIVES OF PLAN.......................................................... 1
Objectives......................................................... 1
Award Achievement.................................................. 1
PARTICIPATION............................................................... 2
Eligibility........................................................ 2
Participation....... .............................................. 2
Non-Eligibility.................................................... 3
Plan Year.......................................................... 3
HOW THE PLAN WORKS.......................................................... 3
Plan Factors....................................................... 3
Setting Furniture Brands Goals..................................... 3
Notification of Participation...................................... 3
MECHANICS OF DETERMINING AWARDS............ ................................ 4
Definitions of Terms............................................... 4
Mechanics of Determining Awards.................................... 4
DISCRETIONARY AWARDS PROGRAM................................................ 5
CERTIFICATION............................................................... 6
PAYMENT OF AWARDS........................................................... 6
ADMINISTRATION.............................................................. 6
MANNER OF EXERCISE OF COMMITTEE AUTHORITY................................... 6
CERTAIN PERFORMANCE BASED AWARDS............................................ 6
NO CONTRACT OF EMPLOYMENT................................................... 6
ASSIGNMENTS AND TRANSFERS................................................... 6
GOVERNING LAW............................................................... 6
AMENDMENT AND TERMINATION OF PLAN AND AWARDS................................ 6
EFFECTIVE DATE OF THE PLAN.................................................. 7
<PAGE>
FURNITURE BRANDS
CORPORATE
EXECUTIVE INCENTIVE PLAN
1. INTRODUCTION
This Executive Incentive Plan (the "Plan") has been designed for those
management persons at the corporate offices of Furniture Brands International,
Inc. ("FBI") who directly and substantially influence achievement of certain
corporate goals. The Plan provides monetary awards for the achievement of those
goals. In select cases, the Plan provides for additional special discretionary
awards.
FBI believes that the total annual income of key employees should be
influenced by their individual and collective effort, and that rewards should
directly relate to the achievement of planned, meaningful results. The Plan is
in addition to and assumes the existence of a base salary which is competitive,
equitable, and subject to periodic performance-related adjustments.
The overall administration and control of the Plan, including final
determination of annual bonus awards to each participant, is the responsibility
of the Executive Compensation and Stock Option Committee of the FBI Board of
Directors (the "Committee"). The Committee (or a subcommittee thereof which has
been designated by the Committee to administer the Plan) shall consist solely of
three or more members of the FBI Board of Directors who are "outside directors"
as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the regulations thereunder. Members of the Committee are not
eligible to participate in the Plan.
2. OBJECTIVES OF PLAN
A. Objectives. The Plan has been created with several objectives in mind:
(1) to emphasize achievement of planned strategic objectives;
(2) to reinforce the importance of annual growth; and
(3) to motivate and challenge participating executives through
meaningful compensation opportunities.
B. Award Achievement. To achieve these objectives, the Plan is designed
to:
(1) provide for monetary awards of significant value related
directly to measurable FBI results;
(2) motivate participating individuals to achieve results beyond
the routine of position responsibilities; and
(3) be appropriate for both the level of responsibility and
total compensation for the position.
Total compensation, resulting from the combination of base salary and
monetary awards under the Plan, is designed to be competitive with
total compensation for similar positions in American industry.
3. PARTICIPATION
A. Eligibility. Only management persons whose performance directly and
substantially influences the annual results of FBI will be considered
for participation in the Plan. Ordinarily the extent of such influence
will be reflected in the Bonus Percentage (as herein defined).
B. Participation
(1) At the start of each Plan Year (as herein defined) FBI
management will submit a list of proposed participants and
Bonus Percentages for review and approval by the Committee.
The Committee may in its discretion change the participants
and Bonus Percentages, provided, however, that the Committee
shall, within the first 90 days of each Plan Year, set forth
in writing, a final approved list of participants and Bonus
Percentages for such Plan Year. Such final list of
participants and Bonus Percentages may not thereafter be
modified except as provided in this Plan. With respect to
persons who have been determined to be "covered employees"
within the meaning of Code Section 162(m)(3) for such Plan
Year (a "Covered Employee"), additional participation in the
Plan during a Plan Year shall be permitted only in the event
of an unusual circumstance, such as a new hire. Executive
officers of the Company may be participants in the Plan to
the extent approved by the Committee.
(2) To earn an award, an individual must be designated a
participant for the Plan Year and must participate
effectively for a minimum of eight full months of the Plan
Year.
(3) A participant who has lost time due to illness, or dies,
retires or becomes totally disabled during the Plan Year,
will be considered for an award under the Plan provided that
his/her influence on goal achievement can be identified and
that achievement of results can be measured.
C. Non-Eligibility
(1) Any individual whose employment is terminated at any time
during the Plan Year by reason of voluntary or encouraged
resignation, or who is discharged, will not receive an
award.
(2) Any individual who has been demoted at any time during the
Plan Year to a position not included in the Plan will not
receive an award.
D. Plan Year. The Plan Year will correspond with the FBI fiscal year.
4. HOW THE PLAN WORKS
A. Plan Factors. There are two factors which will be measured in order to
determine an award: opportunity and FBI performance.
(1) Opportunity is the potential impact that a participant may
have on the achievement of goals. This is expressed by the
Bonus Percentage.
(2) FBI Performance is the result of achievement. This is
measured by the percentage of attainment of FBI's goals.
B. Setting FBI Goals. At or prior to the beginning of each Plan Year, FBI
management will recommend to the Committee for approval, one or more
objective measurable performance goals for FBI (the "Goals") for such
year, and the weighting to be assigned to each Goal. The Goals will be
based upon one or more of the following criteria: sales; earnings;
earnings per share; pre-tax earnings; net profits; return on equity;
cash flow; debt reduction; asset management; stock price; market
share; costs; or selling, general and administrative ("SG&A")
expenses. The Goals will be realistic, yet rigorous. They will be
attainable, but attainment will require above average performance. The
Committee may, in its discretion, approve management's recommendations
or change the Goals and/or weightings, provided, however, that the
Company shall, within the first 90 days of the year (or, in the case
of a new hire added to the Plan during the year, before 25% of such
individual's services for the Company for the year has elapsed), set
forth in writing the final approved Goals, the Minimum Percentages (as
herein defined) for such year and the weighting to be assigned to such
Goals.
C. Notification of Participation. Each participant's target Bonus
Percentage will be communicated each Plan Year by delivery of the
Participation Form.
5. MECHANICS OF DETERMINING AWARDS
A. Definitions of Terms
(1) Bonus Percentage. The Bonus Percentage will be expressed as a
percentage (not less than 10% and not more than 100%) of the
participant's base salary. That percentage will be higher for a
position with significantly greater responsibilities, thus
recognizing the direct relationship between position
responsibility and influence on FBI results. Participants who are
promoted during a Plan Year to a position with a higher Bonus
Percentage will receive a prorated award based on the percentage
of the Plan Year spent in each position.
(2) Aggregate Target Amount. The Aggregate Target Amount will be
expressed as a dollar amount, calculated by multiplying the
participant's base annual salary rate, as in effect on March 1 of
the Plan Year, which has been established at or before the time
of the setting of the Aggregate Target Amount, by the Bonus
Percentage. The result will be the total award to which the
participant will be entitled if FBI achieves 100% of all Goals
for that Plan Year.
(3) Weighted Target Amounts. For each Goal a Weighted Target Amount
will be calculated by multiplying the Aggregate Target Amount by
the weighted percentage applicable to the Goal. The result for
each Goal will be the portion of the total award to which the
participant will be entitled if FBI achieves 100% of that Goal
for that Plan Year. The sum of the Weighted Target Amounts will
equal the Aggregate Target Amount.
B. Mechanics of Determining Awards.
(1) FBI Performance. FBI's performance against the Goals will be
measured by the percentage of achievement of each Goal. FBI's
performance with respect to each Goal will be based upon audited
results.
(2) Achievement of Target. The Plan is designed to provide the
participant with 100% of his/her Weighted Target Amount with
respect to each Goal if FBI achieves 100% satisfaction of that
Goal.
(3) Minimum FBI Performance. Each Plan Year the Committee will
establish a minimum percentage (the "Minimum Percentage") with
respect to each Goal. Achievement below the Minimum Percentage
will result in no award with respect to that Goal.
Under certain circumstances, the Committee may establish Goals
the achievement of which contemplate reducing rather than
increasing an amount, such as a reduced debt level or reduced
SG&A expenses. In any such case, the percentage which will be
applied to the Weighted Target Amount for such Goal will be
inversely proportional to the performance against the Goal. For
example, if a Goal is a year-end debt amount and the actual
year-end debt is 105% of the Goal, the percentage of Weighted
Target Amount to be paid with respect to that Goal would be 95%.
In these circumstances, the Minimum Percentage will be expressed
in terms of a figure greater than 100%.
(4) Calculation of Award. The percentage of FBI's achievement of each
Goal will be applied to the Weighted Target Amount for that Goal
to determine the amount of the award payable with respect to that
Goal. Awards will be calculated separately for each Goal, but
will be aggregated and paid as one award check.
(5) Discretion to Increase Award. The Committee shall, under no
circumstances, increase an award granted under this Section 5
except to the extent permitted under Treasury Regulation Section
1.162-27(e)(2)(iii).
6. DISCRETIONARY AWARDS PROGRAM.
(1) To recognize special needs, a discretionary awards program is
part of this Plan. Its objective is to recognize the performance
of FBI through a more qualitative evaluation, rather than a
quantitative evaluation. This could occur, for example, if FBI
does not achieve one or more Goals due to business or economic
reasons beyond its control but, given these adverse
circumstances, nonetheless performed well. Under such
circumstances, a special award may be granted at the discretion
of the Committee.
(2) To the extent all or any portion of an award is not immediately
deductible as compensation expense by FBI for federal income tax
purposes, payment of such award or portion thereof, as the case
may be, will be deferred until following termination of
employment of the participant or until such earlier date as the
Committee shall, in its discretion, determine, either at the time
of deferral or thereafter, whereupon such award or any portion
thereof, as the case may be, less appropriate withholdings, will
be paid by check provided that the same shall then have become
immediately deductible as compensation expense by FBI for federal
income tax purposes. Simple interest shall be paid annually on
the deferred compensation at FBI's effective borrowing rate.
(3) Nothing contained in this Section 6 shall be deemed to permit or
provide for discretionary increases in awards payable to Covered
Employees under Section 5 hereof.
7. CERTIFICATION. Before any payments are made under this Plan, the Committee
must certify in writing that the Goals justifying the payment of an award have
been met.
8. PAYMENT OF AWARDS. Except as provided in Section 6 hereof, awards, to the
extent immediately deductible as compensation expense by FBI for federal income
tax purposes, less appropriate withholdings, will be paid by check as soon as
practical after the audited close of a fiscal year.
9. ADMINISTRATION. Subject to the limitations as herein set forth, the Committee
is authorized and empowered to administer the Plan; interpret the Plan;
establish, modify and grant waivers of award restrictions; prescribe, amend and
rescind rules relating to the Plan; and determine the rights and obligations of
participants under the Plan. All decisions of the Committee shall be final and
binding upon all parties including the Company, its stockholders, and its
participants.
10. MANNER OF EXERCISE OF COMMITTEE AUTHORITY. The express grant of any specific
power to the Committee and the taking of any action by the Committee, shall not
be construed, as limiting any power or authority of the Committee. All
designations of participation, bonus percentages, goals, minimum percentages,
aggregate amounts, and certifications of performance shall be in writing. A
writing signed by all members of the Committee shall constitute the act of the
Committee without the necessity, in such event, to hold a meeting. The Committee
may delegate the authority, subject to such terms as the Committee shall
determine, to perform administrative functions (excluding those described in the
second sentence of this Section 10) under the Plan.
11. CERTAIN PERFORMANCE BASED AWARD. Any awards under Section 5 hereof are
intended to be "qualified performance-based compensation" within the meaning of
Section 162(m) of the Code and shall be paid solely on account of the attainment
of one or more preestablished, objective performance goals within the meaning of
Section 162(m). If any provision of this Plan does not comply with the
requirements of Section 162(m) of the Code as then applicable to any employee,
such provision shall be construed or deemed amended to the extent necessary to
conform to such requirements with respect to such employee.
12. NO CONTRACT OF EMPLOYMENT. Participation in the Plan shall not be considered
an agreement to employ a participant for any period of time or in any position.
13. ASSIGNMENTS AND TRANSFERS. With the exception of transfer by will or by the
laws of descent and distribution, rights under the Plan may not be transferred
or assigned.
14. GOVERNING LAW. The Plan shall be construed, administered and governed in all
respects under and by the applicable internal laws of the State of Missouri,
without giving effect to the principles of conflicts of law thereof.
15. AMENDMENT AND TERMINATION OF PLAN AND AWARDS. The Board may amend, alter,
suspend, discontinue or terminate the Plan without the consent of stockholders
or participants, except as is required by any federal or state law or regulation
or the rules of any stock exchange on which the shares of FBI ("Shares") are
listed, or if the Board in its discretion determines that obtaining such
stockholder approval is for any reason advisable, provided, however, that (i)
without the consent of an affected participant, no amendment, alteration,
suspension, discontinuation, or termination of the Plan may impair the rights of
such participant under any award theretofore granted to such participant, and
(ii) the Plan may not be amended without the consent of the stockholders of a
majority of the Shares then outstanding to (a) materially modify the
requirements as to eligibility for participation in the Plan, (b) change the
specified performance objectives for payment of awards under Section 5, (c)
increase the maximum award payable under Section 5, (d) withdraw administration
of the Plan from the Committee or (e) extend the period during which awards may
be granted.
16. EFFECTIVE DATE OF THE PLAN. The Plan, as amended, shall become effective on
January 1, 1997 provided that the Plan is approved by the affirmative vote of
the holders of a majority of the Shares present or represented and entitled to
vote at the 1997 annual meeting of the stockholders of FBI. The terms of the
Plan shall be perpetual; subject to earlier termination by the Board pursuant to
Section 15, after which no awards may be made under the Plan, but any such
termination shall not affect awards then outstanding or the authority of the
Committee to continue to administer the Plan.
<PAGE>
Exhibit 10(m)
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of January 1, 2000 by
and between Furniture Brands International, Inc., a Delaware corporation
("Furniture Brands") and Richard B. Loynd ("Loynd").
In accordance with the authority granted by the Executive Compensation and
Stock Option Committee and the Executive Committee of the Board of Directors of
Furniture Brands on November 4, 1999, and for good and valuable consideration
the parties covenant and agree as follows:
1. Employment. Furniture Brands agrees to employ Loynd during the period
beginning January 1, 2000 and ending December 31, 2001, or such earlier date
upon Loynd's death or permanent disability (the "Employment Period"), and Loynd
agrees to serve Furniture Brands as an employee during the Employment Period,
subject to the direction and control of the Board of Directors of Furniture
Brands, all upon the following terms and conditions.
(a) Prior to the commencement of the Employment Period, Loynd will make an
irrevocable election of form of benefit under the Furniture Brands Supplemental
Executive Retirement Plan (SERP). During the Employment Period, Loynd will
receive a salary equal to: (i) the amount of the SERP benefit he would otherwise
be entitled to as a retiree from the company pusuant to that election, and (ii)
the amount of fees he would be entitled to receive as a non-employee Director of
the company. All such amounts will be paid to him as compensation and will be
subject to appropriate withholding.
(b) During the Employment Period, Loynd will also be entitled to
participate in all benefit programs in which he is participating on the date
hereof and to be reimbursed all expenses in accordance with past practice,
except that Loynd will not participate in any bonus or other annual incentive
plan, Loynd's $800,000 term life insurance policy will be allowed to lapse, and
Loynd agrees he will not be a participant in the 401k Savings Plan.
(c) In January of each of 2000 and 2001 Loynd will receive a grant of
Restricted Stock under the Furniture Brands 1999 Long-Term Incentive Plan, in
the amounts and subject to the same restrictions as are applicable to the awards
of restricted stock made to non-employee Directors in each of those years.
(d) Furniture Brands will continue to maintain and pay the expenses of
Furniture Brands' office in New Jersey for the Employment Period, and Loynd will
continue to have the use of that office.
(e) Any amounts being carried by Furniture Brands as deferred compensation
for Loynd for past years of service will be paid to Loynd as soon as they become
immediately deductible by Furniture Brands as compensation expense.
2. Duties. Loynd agrees during the Employment Period to perform such
executive duties for Furniture Brands and for Furniture Brands' subsidiaries
relating to its business as the Furniture Brands Board of Directors may
reasonably direct from time to time.
3. Term. This agreement will terminate on December 31, 2001, or upon
Loynd's death or permanent disability, whichever is the earlier.
4. Miscellaneous. This Employment Agreement shall be binding upon and shall
inure to the benefit of Furniture Brands and its successors and assigns. This
Agreement shall supersede and stand in place of any and all other employment
agreements between Loynd and Furniture Brands or any of its subsidiaries. This
Employment Agreement shall take effect as of the day and year first above set
forth, and its validity, interpretation, construction and performance shall be
governed by the laws of the State of Missouri.
5. Entire Agreement. This Agreement contains the entire agreement of the
parties with respect to its subject matter, and no waiver, modification or
change of any of its provisions shall be valid unless in writing and signed by
the party against whom such claimed waiver, modification or change is sought to
be enforced.
IN WITNESS WHEREOF, the parties hereto have each executed this Agreement
the date set forth below.
FURNITURE BRANDS INTERNATIONAL, INC.
By: /s/ W.G. Holliman
Chairman, President and
Chief Executive Officer
RICHARD B. LOYND
By: /s/ R.B. Loynd
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Furniture Brands International, Inc.:
We consent to incorporation by reference in the registration statements (Nos.
33-65714, 333-6990, 333-39355, 333-80189) on Form S-8 of Furniture Brands
International, Inc. of our report dated January 27, 2000, relating to the
consolidated balance sheets of Furniture Brands International, Inc. and
subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of operations, shareholders' equity, and cash flows and the related
schedule for each of the years in the three-year period ended December 31, 1999,
which report appears in the December 31, 1999 annual report on Form 10-K of
Furniture Brands International, Inc.
St. Louis, Missouri
March 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<PERIOD-TYPE> 12-MOS
<CASH> 7,409
<SECURITIES> 0
<RECEIVABLES> 364,442
<ALLOWANCES> 19,057
<INVENTORY> 285,395
<CURRENT-ASSETS> 671,900
<PP&E> 545,634
<DEPRECIATION> 247,888
<TOTAL-ASSETS> 1,288,834
<CURRENT-LIABILITIES> 153,864
<BONDS> 535,100
0
0
<COMMON> 52,277
<OTHER-SE> 120,326
<TOTAL-LIABILITY-AND-EQUITY> 1,288,834
<SALES> 2,088,112
<TOTAL-REVENUES> 2,088,112
<CGS> 1,498,622
<TOTAL-COSTS> 1,498,622
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<LOSS-PROVISION> 2,362
<INTEREST-EXPENSE> 37,577
<INCOME-PRETAX> 176,764
<INCOME-TAX> 64,854
<INCOME-CONTINUING> 111,910
<DISCONTINUED> 0
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<NET-INCOME> 111,910
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