FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 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
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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
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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.
49,635,523 Shares as of July 31, 2000
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<PAGE>
PART I FINANCIAL INFORMATION
----------------------------
Item 1. Financial Statements
Consolidated Financial Statements for the quarter ended June 30, 2000.
Consolidated Balance Sheets
Consolidated Statements of Operations:
Three Months Ended June 30, 2000
Three Months Ended June 30, 1999
Six Months Ended June 30, 2000
Six Months Ended June 30, 1999
Consolidated Statements of Cash Flows:
Six Months Ended June 30, 2000
Six Months Ended June 30, 1999
Notes to Consolidated Financial Statements
The financial statements are unaudited, but include all adjustments (consisting
of normal recurring adjustments) which the management of the Company considers
necessary for a fair presentation of the results of the period. The results for
the three months and six months ended June 30, 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)
June 30, December 31,
2000 1999
------------ ------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents...................... $ 11,239 $ 7,409
Receivables, less allowances of $21,076
($19,057 at December 31, 1999)............... 360,730 345,385
Inventories.........................(Note 1)... 310,941 285,395
Prepaid expenses and other current assets...... 33,868 33,711
----------- -----------
Total current assets......................... 716,778 671,900
----------- -----------
Property, plant and equipment.................... 559,060 545,634
Less accumulated depreciation.................. 267,992 247,888
----------- -----------
Net property, plant and equipment............ 291,068 297,746
----------- -----------
Intangible assets................................ 296,670 303,446
Other assets..................................... 13,503 15,742
----------- -----------
$ 1,318,019 $ 1,288,834
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued interest expense....................... $ 2,549 $ 1,762
Accounts payable and other accrued expenses.... 157,283 152,102
----------- -----------
Total current liabilities.................... 159,832 153,864
----------- -----------
Long-term debt........................(Note 2)... 502,500 535,100
Other long-term liabilities...................... 120,128 125,673
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 June 30, 2000 and
December 31, 1999............................ 52,277 52,277
Paid-in capital................................ 118,453 120,326
Retained earnings.............................. 414,793 356,572
Treasury stock at cost (2,641,943 shares at
June 30, 2000 and 2,907,059 shares at
December 31, 1999)........................... (49,964) (54,978)
----------- -----------
Total shareholders' equity................... 535,559 474,197
----------- -----------
$ 1,318,019 $ 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)
<S> <C> <C>
Three Months Three Months
Ended Ended
June 30, June 30,
2000 1999
------------ ------------
Net sales...................................... $ 533,079 $ 520,061
Costs and expenses:
Cost of operations........................... 380,989 371,599
Selling, general and administrative expenses. 81,331 81,073
Depreciation and amortization................ 15,298 14,654
------------- ------------
Earnings from operations....................... 55,461 52,735
Interest expense............................... 9,308 9,568
Other income, net.............................. 959 572
------------- ------------
Earnings before income tax expense and
extraordinary item........................... 47,112 43,739
Income tax expense............................. 16,969 16,147
------------- ------------
Net earnings before extraordinary item......... 30,143 27,592
Extraordinary item - early extinguishment of
debt, net of tax benefit....(Note 3)......... (2,522) -
------------- ------------
Net earnings................................... $ 27,621 $ 27,592
============= ============
Net earnings per common share - basic:
Net earnings before extraordinary item....... $ 0.61 $ 0.54
Extraordinary item - early extinguishment
of debt.................................... (0.05) -
------ ------
Net earnings per common share - basic.......... $ 0.56 $ 0.54
====== ======
Net earnings per common share - diluted:
Net earnings before extraordinary item....... $ 0.60 $ 0.52
Extraordinary item - early extinguishment
of debt.................................... (0.05) -
------ ------
Net earnings per common share - diluted........ $ 0.55 $ 0.52
====== ======
Weighted average common and common equivalent shares outstanding:
Basic........................................ 49,463,669 51,443,733
========== ==========
Diluted...................................... 50,460,912 52,927,848
========== ==========
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)
Six Months Six Months
Ended Ended
June 30, June 30,
2000 1999
---------- ----------
<S> <C> <C>
Net sales...................................... $1,097,026 $1,053,963
Costs and expenses:
Cost of operations........................... 785,708 753,296
Selling, general and administrative expenses. 168,294 165,129
Depreciation and amortization................ 30,847 29,622
---------- ----------
Earnings from operations....................... 112,177 105,916
Interest expense............................... 18,917 19,422
Other income, net.............................. 1,694 1,193
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Earnings before income tax expense and
extraordinary item........................... 94,954 87,687
Income tax expense............................. 34,211 32,388
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Net earnings before extraordinary item......... 60,743 55,299
Extraordinary item - early extinguishment of
debt, net of tax benefit....(Note 3)......... (2,522) -
---------- ----------
Net earnings................................... $ 58,221 $ 55,299
========== ==========
Net earnings per common share - basic:
Net earnings before extraordinary item....... $ 1.23 $ 1.07
Extraordinary item - early extinguishment
of debt.................................... (0.05) -
------ ------
Net earnings per common share - basic.......... $ 1.18 $ 1.07
====== ======
Net earnings per common share - diluted:
Net earnings before extraordinary item....... $ 1.21 $ 1.04
Extraordinary item - early extinguishment
of debt.................................... (0.05) -
------ ------
Net earnings per common share - diluted........ $ 1.16 $ 1.04
====== ======
Weighted average common and common equivalent shares outstanding:
Basic........................................ 49,418,712 51,502,226
========== ==========
Diluted...................................... 50,405,810 53,026,934
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
2000 1999
----------- ----------
Cash flows from operating activities:
<S> <C> <C>
Net earnings......................................... $ 58,221 $ 55,299
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Net loss on early extinguishment of debt......... 2,522 -
Depreciation of property, plant and equipment.... 24,817 23,592
Amortization of intangible and other assets...... 6,030 6,030
Noncash interest and other expense............... 888 1,171
Increase in receivables.......................... (15,345) (30,859)
(Increase) decrease in inventories............... (25,546) 9,259
(Increase) decrease in prepaid expenses and
other assets................................... 43 (2,592)
Increase in accounts payable, accrued interest
expense and other accrued expenses............. 7,488 7,256
Decrease in net deferred tax liabilities......... (2,038) (2,763)
Increase (decrease) in other long-term
liabilities.................................... (1,869) 1,984
-------- --------
Net cash provided by operating activities............ 55,211 68,377
-------- --------
Cash flows from investing activities:
Proceeds from the disposal of assets................. 26 23
Additions to property, plant and equipment........... (19,574) (25,878)
-------- --------
Net cash used by investing activities................ (19,548) (25,855)
-------- --------
Cash flows from financing activities:
Payments for debt issuance costs..................... (2,089) -
Additions to long-term debt.......................... 486,500 -
Payments of long-term debt........................... (519,100) (38,600)
Proceeds from the issuance of treasury stock......... 2,856 4,850
Purchase of treasury stock........................... - (15,454)
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Net cash used by financing activities................ (31,833) (49,204)
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Net increase (decrease) in cash and cash equivalents... 3,830 (6,682)
Cash and cash equivalents at beginning of period....... 7,409 13,220
---------- ----------
Cash and cash equivalents at end of period............. $ 11,239 $ 6,538
========== ==========
Supplemental Disclosure:
Cash payments for income taxes, net.................. $ 36,631 $ 37,667
========== ==========
Cash payments for interest........................... $ 17,565 $ 18,825
========== ==========
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:
June 30, December 31,
2000 1999
----------- -----------
Finished products $ 137,103 $ 112,389
Work-in-process 53,713 58,479
Raw materials 120,125 114,527
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$ 310,941 $ 285,395
=========== ===========
(2) On June 7, 2000, the Company refinanced its secured credit agreement.
The new credit facility is an unsecured, five-year, revolving credit
facility with a commitment of $630.0 million.
The new revolving credit facility allows for the issuance of letters of
credit and cash borrowings. Letter of credit outstandings are limited to
no more than $150.0 million, with cash borrowings limited only by the
facility's maximum availability less letters of credit outstanding. On
June 30, 2000, $486.5 million in cash borrowings were outstanding under
the credit facility.
Cash borrowings under the new 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 the credit ratings the facility
receives from Standard & Poor's and Moody's. At June 30, 2000, loans
outstanding under the credit facility consisted of $465.0 million based
upon LIBOR and $21.5 million based upon the base rate for a weighted
average interest rate of 7.47%.
(3) In conjunction with the June 7, 2000 refinancing of the secured credit
agreement, the Company charged to results of operations $2.5 million,
net of taxes of $1.5 million, representing the deferred financing fees
and expenses pertaining to the refinanced credit facility. The charge
was recorded as an extraordinary item.
(4) Weighted average shares used in the computation of basic and diluted net
earnings per common share are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- ----------------------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted average shares used
for basic net earnings per
common share 49,463,669 51,443,733 49,418,712 51,502,226
Effect of dilutive securities:
Stock options 997,243 1,484,115 987,098 1,524,708
----------- ----------- ---------- -----------
Weighted average shares used
for diluted net earnings
per common share 50,460,912 52,927,848 50,405,810 53,026,934
=========== =========== ========== ===========
</TABLE>
<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
one of the largest home furniture manufacturers 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 and Six Months Ended June 30, 2000 and 1999
----------------------------------------------------------------------
Selected financial information for the three months and six months ended June
30, 2000 and June 30, 1999 is presented below:
(Dollars in millions except per share data)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------
June 30, 2000 June 30, 1999
------------- -------------
% of % of
Dollars Net Sales Dollars Net Sales
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Net sales $533.1 100.0% $520.1 100.0%
Earnings from operations 55.5 10.4% 52.7 10.1%
Interest expense 9.3 1.7% 9.5 1.8%
Income tax expense 17.0 3.2% 16.2 3.1%
Net earnings before extraordinary item 30.1 5.7% 27.6 5.3%
Net earnings per common share before
extraordinary item - diluted 0.60 - 0.52 -
Gross profit (1) $141.6 26.6% $138.2 26.6%
Six Months Ended
----------------------------------
June 30, 2000 June 30, 1999
------------- -------------
% of % of
Dollars Net Sales Dollars Net Sales
------- --------- ------- ---------
Net sales $1,097.0 100.0% $1,054.0 100.0%
Earnings from operations 112.2 10.2% 105.9 10.0%
Interest expense 18.9 1.7% 19.4 1.8%
Income tax expense 34.2 3.1% 32.4 3.1%
Net earnings before extraordinary item 60.7 5.5% 55.3 5.2%
Net earnings per common share before
extraordinary item - diluted 1.21 - 1.04 -
Gross profit (1) $290.0 26.4% $279.9 26.6%
</TABLE>
(1) The Company believes that gross profit provides useful information
regarding a company's financial performance. Gross profit has been
calculated by subtracting cost of operations and the portion of
depreciation associated with cost of goods sold from net sales.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
2000 1999 2000 1999
------- ------- --------- --------
Net sales $533.1 $520.1 $1,097.0 $1,054.0
Cost of operations 381.0 371.6 785.7 753.3
Depreciation (associated with
cost of goods sold) 10.5 10.3 21.3 20.8
------ ------ -------- --------
Gross profit $141.6 $138.2 $ 290.0 $ 279.9
====== ====== ======== ========
Net sales for the three months ended June 30, 2000 were $533.1 million, compared
to $520.1 million in the three months ended June 30, 1999, an increase of $13.0
million or 2.5%. For the six months ended June 30, 2000, net sales increased
$43.0 million or 4.1% to $1,097.0 million from $1,054.0 million for the six
months ended June 30, 1999. The improved sales performance for both periods
occurred at each operating company. Earnings from operations for the three
months ended June 30, 2000 increased by $2.8 million or 5.2% from the comparable
prior year period. Earnings from operations for the three months ended June 30,
2000 and June 30, 1999 were 10.4% and 10.1% of net sales, respectively. For the
six months ended June 30, 2000, earnings from operations increased by $6.3
million, or 5.9% from the comparable six months of 1999. As a percentage of net
sales, earnings from operations for the six months ended June 30, 2000 and June
30, 1999 were 10.2% and 10.0%, respectively. The increase in operating earnings
was due to higher sales volume and continued tight control of selling, general
and administrative expenses.
Interest expense totaled $9.3 million and $18.9 million for the three months and
six months ended June 30, 2000, respectively, compared to $9.5 million and $19.4
million for the prior year comparable periods. The decrease in interest expense
during the periods resulted from lower long-term debt levels partially offset by
higher interest rates.
The effective income tax rates were 36.0% and 36.9% for the three months ended
June 30, 2000 and June 30, 1999, respectively, and 36.0% and 36.9% for the six
months ended June 30, 2000 and June 30, 1999, respectively. The effective tax
rates for each period were adversely impacted by certain nondeductible expenses
incurred and provisions for state and local income taxes.
Net earnings per common share before extraordinary item for basic and diluted
were $0.61 and $0.60 for the three months ended June 30, 2000, respectively,
compared with $0.54 and $0.52 for the same period last year, respectively. For
the six months ended June 30, 2000 and June 30, 1999, net earnings per common
share for basic and diluted were $1.23 and $1.21, respectively, and $1.07 and
$1.04, respectively. Average common and common equivalent shares outstanding
used in the calculation of net earnings per common share on a basic and diluted
basis were 49,464,000 and 50,461,000, respectively, for the three months ended
June 30, 2000, and 51,444,000 and 52,928,000, respectively, for the three months
ended June 30, 1999. For the six months ended June 30, 2000 and June 30, 1999,
average common and common equivalent shares outstanding used in the calculation
of net earnings per common share on a basic and diluted basis were 49,419,000
and 50,406,000, respectively, and 51,502,000 and 53,027,000, respectively.
FINANCIAL CONDITION
Working Capital
---------------
Cash and cash equivalents at June 30, 2000 amounted to $11.2 million, compared
with $7.4 million at December 31, 1999. During the six months ended June 30,
2000, net cash provided by operating activities totaled $55.2 million, net cash
used by investing activities totaled $19.6 million and net cash used by
financing activities totaled $31.8 million.
Working capital was $556.9 at June 30, 2000, compared with $518.0 million at
December 31, 1999. The current ratio was 4.5-to-1 at June 30, 2000, compared to
4.4-to-1 at December 31, 1999.
Financing Arrangements
----------------------
As of June 30, 2000, long-term debt consisted of the following, in millions:
Revolving credit facility $486.5
Other 16.0
------
$502.5
======
On June 7, 2000, the Company refinanced its secured credit agreement. The new
credit facility is an unsecured, five-year, revolving credit facility with a
commitment of $630.0 million.
The new revolving credit facility allows for the issuance of letters of credit
and cash borrowings. Letter of credit outstandings are limited to no more than
$150.0 million, with cash borrowings limited only by the facility's maximum
availability less letters of credit outstanding. On June 30, 2000, $486.5
million in cash borrowings were outstanding under the credit facility.
Cash borrowings under the new 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 the credit ratings the facility receives from Standard & Poor's and
Moody's. At June 30, 2000, loans outstanding under the credit facility consisted
of $465.0 million based upon LIBOR and $21.5 million based upon the base rate
for a weighted average interest rate of 7.47%.
The Company believes its revolving credit facility, together with cash generated
from operations, will be adequate to meet liquidity requirements for the
foreseeable future.
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.
<PAGE>
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on April 27, 2000. The
directors listed in the Notice of Annual Meeting of Stockholders dated
March 16, 2000 were elected for terms of one year ending 2001 with
voting for each as follows:
Director For Withheld
-------- --- --------
K. B. Bell 42,786,078 186,972
W. G. Holliman 42,792,809 180,241
B. A. Karsh 42,781,872 191,178
D. E. Lasater 42,772,387 200,663
L. M. Liberman 42,771,547 201,503
R. B. Loynd 42,769,451 203,579
M. Portera 42,786,288 186,762
A. E. Suter 42,785,968 187,082
Item 5. Other Information
On June 7, 2000, the Company refinanced its secured credit facility.
The new credit facility is an unsecured, five-year, revolving credit
facility with a commitment of $630.0 million. The new revolving credit
facility allows for the issuance of letters of credit and cash
borrowings. Letters of credit outstanding are limited to no more than
$150.0 million with cash borrowings limited by the facility's maximum
availability less letters of credit outstanding. Cash borrowings under
the new 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 is subject to adjustment based upon the credit
ratings the facility receives from Standard & Poor's and Moody's.
Item 6. Exhibits and Reports on Form 8-K
(a) 4. Credit Agreement, dated as of June 7, 2000, among the Company,
Broyhill Furniture Industries, Inc., Lane Furniture Industries,
Inc., Thomasville Furniture Industries, Inc., Various Lenders,
First Union National Bank, as Documentation Agent, Bank of
America, N.A., as Syndication Agent, Deutsche Bank AG, New York
Branch, as Administrative Agent, and Deutsche Bank Securities
Inc., as Lead Arranger and Sole Book Manager.
27. Financial Data Schedule.
(b) A Form 8-K was not required to be filed during the quarter ended
June 30, 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 Steven W. Alstadt
---------------------------------
Steven W. Alstadt
Controller and
Chief Accounting Officer
Date: August 11, 2000
