FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
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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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Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days.
YES X NO
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APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
49,393,623 Shares as of April 30, 2000
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<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Financial Statements for the quarter ended March 31, 2000.
Consolidated Balance Sheets
Consolidated Statements of Operations:
Three Months Ended March 31, 2000
Three Months Ended March 31, 1999
Consolidated Statements of Cash Flows:
Three Months Ended March 31, 2000
Three Months Ended March 31, 1999
Notes to Consolidated Financial Statements
Separate financial statements and other disclosures with respect to the
Company's subsidiaries are omitted as such separate financial statements and
other disclosures are not deemed material to investors.
The financial statements are unaudited, but include all adjustments (consisting
of normal recurring adjustments) which the management of the Company considers
necessary for a fair presentation of the results of the period. The results for
the three months ended March 31, 2000 are not necessarily indicative of the
results to be expected for the full year.
<PAGE>
<TABLE>
<CAPTION>
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
March 31, December 31,
2000 2000
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ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents...................... $ 10,693 $ 7,409
Receivables, less allowances of $20,179
($19,057 at December 31, 1999)............... 377,304 345,385
Inventories.........................(Note 1)... 292,020 285,395
Prepaid Expenses and Other Current Assets...... 33,867 33,711
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Total Current Assets......................... 713,884 671,900
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Property, plant and equipment.................... 555,149 545,634
Less Accumulated Depreciation.................. 260,217 247,888
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Net Property, Plant and Equipment............ 294,932 297,746
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Intangible assets................................ 300,058 303,446
Other Assets..................................... 15,475 15,742
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$ 1,324,349 $ 1,288,834
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued interest expense....................... $ 7,259 $ 1,762
Accounts payable and other accrued expenses.... 185,611 152,102
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Total Current Liabilities.................... 192,870 153,864
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Long-term debt................................... 502,000 535,100
Other long-term liabilities...................... 124,343 125,673
Shareholders' equity:
Preferred stock, authorized 10,000,000
shares, no par value - issued, none.......... - -
Common stock, authorized 100,000,000 shares,
$1.00 stated value - issued 52,277,066
shares at March 31, 2000 and
December 31, 1999............................ 52,277 52,277
Paid-in capital................................ 120,336 120,326
Retained earnings.............................. 387,172 356,572
Treasury stock at cost (2,889,643 shares at
March 31, 2000 and 2,907,059 shares at
December 31, 1999)........................... (54,649) (54,978)
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Total Shareholders' Equity................... 505,136 474,197
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$ 1,324,349 $ 1,288,834
============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
2000 1999
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<S> <C> <C>
Net sales...................................... $ 563,947 $ 533,902
Costs and expenses:
Cost of operations........................... 404,719 381,697
Selling, general and administrative expenses. 86,963 84,056
Depreciation and amortization................ 15,549 14,968
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Earnings from operations....................... 56,716 53,181
Interest expense............................... 9,609 9,854
Other income, net.............................. 735 621
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Earnings before income tax expense............. 47,842 43,948
Income tax expense............................. 17,242 16,241
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Net Earnings................................... $ 30,600 $ 27,707
============ ============
Net earnings per common share:
Basic........................................ $ 0.62 $ 0.54
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Diluted...................................... $ 0.61 $ 0.52
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Weighted average common shares outstanding:
Basic........................................ 49,373,755 51,561,368
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Diluted...................................... 50,351,176 53,127,433
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
2000 1999
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Cash flows from operating activities:
<S> <C> <C>
Net earnings......................................... $ 30,600 $ 27,707
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation of property, plant and equipment.... 12,534 11,953
Amortization of intangible and other assets...... 3,015 3,015
Noncash interest and other expense............... 491 560
Increase in receivables.......................... (31,919) (32,583)
(Increase) decrease in inventories............... (6,625) 7,566
Increase in prepaid expenses and other assets.... (580) (1,562)
Increase in accounts payable, accrued interest
expense and other accrued expenses............. 39,006 9,972
Decrease in net deferred tax liabilities......... (1,301) (1,279)
Increase in other long-term liabilities.......... 686 1,151
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Net cash provided by operating activities............ 45,907 26,500
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Cash flows from investing activities:
Proceeds from the disposal of assets................. 12 5
Additions to property, plant and equipment........... (9,732) (9,616)
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Net cash used by investing activities................ (9,720) (9,611)
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Cash flows from financing activities:
Payments of long-term debt........................... (33,100) (10,800)
Proceeds from the issuance of treasury stock......... 197 1,573
Purchase of treasury stock........................... - (15,454)
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Net cash used by financing activities................ (32,903) (24,681)
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Net increase (decrease) in cash and cash equivalents... 3,284 (7,792)
Cash and cash equivalents at beginning of period....... 7,409 13,220
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Cash and cash equivalents at end of period............. $ 10,693 $ 5,428
============ ============
Supplemental Disclosure:
Cash payments for income taxes, net.................. $ 1,824 $ 6,360
============ ============
Cash payments for interest........................... $ 3,696 $ 9,463
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See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)
(1) Inventories are summarized as follows:
March 31, December 31,
2000 1999
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Finished products $ 120,534 $ 112,389
Work-in-process 54,281 58,479
Raw materials 117,205 114,527
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$ 292,020 $ 285,395
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(2) Weighted average shares used in the computation of basic and diluted net
earnings per common share are as follows:
Three Months Three Months
Ended Ended
March 31, March 31,
2000 1999
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Weighted average shares used for
basic net earnings per common
share 49,373,755 51,561,368
Effect of dilutive securities:
Stock Options 977,421 1,566,065
Weighted average shares used for
diluted net earnings per common ---------- ----------
share 50,351,176 53,127,433
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<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
RESULTS OF OPERATIONS
Furniture Brands International, Inc. (referred to herein as the "Company") is
the largest home furniture manufacturer in the United States. The Company has
three primary operating subsidiaries: Broyhill Furniture Industries, Inc.; Lane
Furniture Industries, Inc.; and Thomasville Furniture Industries, Inc.
Comparison of Three Months Ended March 31, 2000 and 1999
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Selected financial information for the three months ended March 31, 2000 and
March 31, 1999 is presented below:
(Dollars in millions except per share data)
Three Months Ended
----------------------------------------
March 31, 2000 March 31, 1999
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% of % of
Dollars Net Sales Dollars Net Sales
------- --------- ------- ---------
Net sales $563.9 100.0% $533.9 100.0%
Cost of operations 404.7 71.8 381.7 71.5
Selling, general and administrative
expenses 87.0 15.4 84.0 15.7
Depreciation and amortization 15.5 2.7 15.0 2.8
------ ----- ------ -----
Earnings from operations 56.7 10.1 53.2 10.0
Interest expense 9.6 1.7 9.9 1.9
Other income, net 0.7 0.1 0.6 0.1
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Earnings before income tax expense 47.8 8.5 43.9 8.2
Income tax expense 17.2 3.1 16.2 3.0
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Net earnings $ 30.6 5.4% $ 27.7 5.2%
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Gross profit (1) $148.4 26.3% $141.7 26.5%
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(1) The Company believes that gross profit provides useful information
regarding a company's financial performance. Gross profit has been
calculated by subtracting cost of operations and the portion of
depreciation associated with cost of goods sold from net sales.
Three Months Ended
March 31,
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2000 1999
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Net sales $563.9 $533.9
Cost of operations 404.7 381.7
Depreciation (associated with
cost of goods sold) 10.8 10.5
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Gross profit $148.4 $141.7
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Net sales for the three months ended March 31, 2000 were $563.9 million,
compared to $533.9 million in the three months ended March 31, 1999, an increase
of $30.0 million or 5.6%. The improved sales performance occurred at each
operating company and reflected a strong order flow throughout the period.
Shipments at selective locations were negatively impacted in late January due to
severe winter weather.
Cost of operations for the three months ended March 31, 2000 was $404.7 million
compared to $381.7 million for the comparable prior year period. Cost of
operations as a percentage of net sales increased from 71.5% for the three
months ended March 31, 1999 to 71.8% for the three months ended March 31, 2000.
The increase reflects manufacturing inefficiencies caused by severe winter
weather in late January.
Selling, general and administrative expenses for the three months ended March
31, 2000 were $87.0 million compared with $84.0 million in the prior year. As a
percentage of net sales, selling, general and administrative expenses were 15.4%
and 15.7% for the three months ended March 31, 2000 and March 31, 1999,
respectively. The decrease reflects tight control of selling, general and
administrative expenses.
<PAGE>
Interest expense totaled $9.6 million for the three months ended March 31, 2000
compared to $9.9 million in the prior year comparable period. The decrease in
interest expense in the three months ended March 31, 2000 resulted from lower
long-term debt levels partially offset by higher interest rates.
The effective income tax rate was 36.0% and 37.0% for the three months ended
March 31, 2000 and March 31, 1999, respectively. The effective tax rates for
each period were adversely impacted by certain nondeductible expenses incurred
and provisions for state and local taxes.
Net earnings per common share for basic and diluted were $0.62 and $0.61,
respectively, for the three months ended March 31, 2000, compared with $0.54 and
$0.52, respectively, for the same period last year. Average common and common
equivalent shares outstanding used in the calculation of net earnings per common
share on a basic and diluted basis were 49,374,000 and 50,351,000, respectively,
for the three months ended March 31, 2000 and 51,561,000 and 53,127,000,
respectively, for the three months ended March 31, 1999.
FINANCIAL CONDITION
Working Capital
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Cash and cash equivalents at March 31, 2000 amounted to $10.7 million, compared
with $7.4 million at December 31, 1999. During the three months ended March 31,
2000, net cash provided by operating activities totaled $45.9 million, net cash
used by investing activities totaled $9.7 million and net cash used by financing
activities totaled $32.9 million.
Working capital was $521.0 at March 31, 2000, compared with $518.0 million at
December 31, 1999. The current ratio was 3.7-to-1 at March 31, 2000, compared to
4.4-to-1 at December 31, 1999.
FINANCING ARRANGEMENTS
As of March 31, 2000, long-term debt consisted of the following, in millions:
Secured credit agreement:
Revolving credit facility $285.2
Term loan facility 200.0
Other 16.8
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$502.0
======
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 March 31, 2000, there were $285.2 million of cash
borrowings outstanding under the revolving credit facility and $41.3 million in
letters of credit outstanding, leaving an excess of $273.5 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.
Forward-looking Statements
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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.
<PAGE>
PART II OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
(a) 27. Financial Data Schedule.
(b) A Form 8-K was not required to be filed during the quarter ended
March 31, 2000.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Furniture Brands International, Inc.
(Registrant)
BY /s/ STEVEN W. ALSTADT
------------------------
Steven W. Alstadt
Controller and
Chief Accounting Officer
Date: May 11, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<PERIOD-TYPE> 3-MOS
<CASH> 10,693
<SECURITIES> 0
<RECEIVABLES> 397,483
<ALLOWANCES> 20,179
<INVENTORY> 292,020
<CURRENT-ASSETS> 713,884
<PP&E> 555,149
<DEPRECIATION> 260,217
<TOTAL-ASSETS> 1,324,349
<CURRENT-LIABILITIES> 192,870
<BONDS> 502,000
0
0
<COMMON> 52,277
<OTHER-SE> 120,336
<TOTAL-LIABILITY-AND-EQUITY> 1,324,349
<SALES> 563,947
<TOTAL-REVENUES> 563,947
<CGS> 404,719
<TOTAL-COSTS> 404,719
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,037
<INTEREST-EXPENSE> 9,609
<INCOME-PRETAX> 47,842
<INCOME-TAX> 17,242
<INCOME-CONTINUING> 30,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,600
<EPS-BASIC> 0.62
<EPS-DILUTED> 0.61
</TABLE>
