ST. LOUIS, Jan. 31, 2007 (PRIME NEWSWIRE) -- Furniture Brands International (NYSE:FBN) announced today its financial results for the fourth quarter and full year ended December 31, 2006.
Operating Results -- Fourth Quarter
Net sales for the fourth quarter of 2006 were $586.5 million, compared with $593.5 million in the fourth quarter of 2005, a decrease of 1.2%. Net earnings for the fourth quarter were $2.1 million, down from $17.1 million reported for the fourth quarter of last year. Diluted net earnings per common share were $0.04 as compared to $0.34 ($0.32 pro forma for $0.9 million of net stock option expense) in the fourth quarter of last year.
Included in the 2006 fourth quarter net earnings were restructuring, asset impairment and severance charges totaling $0.02 per diluted common share and the effect of $0.02 in increased expense due to the upfront recognition of the gain on interest rate swaps at the end of the first quarter, as previously announced. The 2005 fourth quarter net earnings were negatively impacted by restructuring, asset impairment and severance charges totaling $0.02 per diluted common share.
Operating Results -- Full Year 2006
Net sales for the full year of 2006 were $2,418.2 million, compared with $2,386.8 million for the full year of 2005, an increase of 1.3%. Net earnings for the year were $55.1 million as compared to $61.4 million in 2005. Diluted net earnings per common share were $1.13 for the full year 2006 as compared to $1.18 ($1.10 pro forma for $4.2 million of net stock option expense) in year 2005.
Included in the 2006 full year net earnings were restructuring, asset impairment and severance charges totaling $0.10 per diluted common share; $0.11 per diluted common share from the recognition of an accounting gain on interest rate swaps as a result of the refinancing of the company's revolving credit facility but offsetting this gain was the effect of $0.07 in increased interest expense; and $0.02 in increased reserves related to a previously disclosed litigation matter. Included in the 2005 full year net earnings were restructuring, asset impairment and severance charges totaling $0.27 per diluted common share.
Management Comments
W. G. (Mickey) Holliman, Chairman and Chief Executive Officer, commented: "Business conditions in the fourth quarter were difficult across all our companies. As the quarter progressed, retail conditions materially softened. In an effort to continue with our original plan of inventory reduction, we promoted aggressively and took additional discounts on selected slower moving products. We also scheduled additional downtime in our domestic facilities. Both of these items had a significant impact on our earnings for the quarter.
"For the full year, our net sales were up slightly but our pro forma net earnings fell considerably short, primarily as a result of such a difficult fourth quarter. As we move into the new year, we continue to drive change throughout the entire company. Though the process of change is difficult, we will gain the benefits of our size, our brands, and our talented leadership team. We will continue to focus on optimizing our logistics and supply chain processes, and other strategic initiatives to drive both growth and margin expansion throughout the company."
Outlook
Mr. Holliman concluded, "With respect to the first quarter, the current environment is challenging -- especially when compared to a very strong first quarter a year ago. We expect net sales to be down around 10 percent versus the first quarter of last year and net earnings per diluted common share to be in the $0.12 to $0.16 range. This includes the effect of $0.02 in restructuring, asset impairment and severance charges. This also includes the effect of $0.03 in increased interest expense due to the upfront recognition of the gain on the interest rate swaps, also previously disclosed. As is our practice, we will provide an update on our first quarter expectations in early March."
Furniture Brands International is one of America's largest residential furniture companies. The company produces, sources and markets its products under six of the best-known brand names in the industry -- Broyhill, Lane, Thomasville, Henredon, Drexel Heritage and Maitland-Smith.
A conference call will be held to discuss the fourth quarter results at 7:30 a.m. (Central Time) on February 1, 2007. The call can be accessed on the company's website at www.furniturebrands.com.
The Furniture Brands International logo is available at http://www.primezone.com/newsroom/prs/?pkgid=2757
Statements in this release that are not strictly historical may be forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties, and Furniture Brands undertakes no obligation to update any such statement to reflect later developments. These include economic conditions, competitive factors, raw material pricing and restructuring efforts, among others, as set forth in the Company's most recent Form 10-K filed with the SEC.
In this press release, our financial results are provided both in accordance with generally accepted accounting principles (GAAP), and using certain non-GAAP financial measures. In particular, we provide historic and estimated future net earnings per diluted common share excluding certain charges which are non-GAAP financial measures. These results are included as a complement to results provided in accordance with GAAP because we believe these non-GAAP financial measures help indicate underlying trends in our business and provide useful information to both management and investors by excluding certain items that are not indicative of our core operating results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results.
FURNITURE BRANDS INTERNATIONAL
CONSOLIDATED OPERATING RESULTS
(Dollars in thousands except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
--------------------- ---------------------
Dec. 31 Dec. 31 Dec. 31 Dec. 31
2006 2005 2006 2005
---------- ---------- ---------- ----------
Net sales $ 586,538 $ 593,529 $2,418,175 $2,386,774
Cost of sales 469,364 456,589 1,888,140 1,846,823
---------- ---------- ---------- ----------
Gross profit 117,174 136,940 530,035 539,951
Selling, general &
administrative expense 113,941 109,548 446,313 440,603
Earnings from operations 3,233 27,392 83,722 99,348
Interest expense 5,079 2,783 17,669 11,877
Other income, net 1,421 1,086 14,869 4,523
---------- ---------- ---------- ----------
Earnings before income
tax exp (425) 25,695 80,922 91,994
Income tax expense (2,483) 8,553 25,867 30,558
---------- ---------- ---------- ----------
Net earnings $ 2,058 $ 17,142 $ 55,055 $ 61,436
========== ========== ========== ==========
Net earnings per common
share (diluted) $ 0.04 $ 0.34 $ 1.13 $ 1.18
Average diluted common
shares outstanding
(in thousands) 48,334 50,479 48,753 52,104
Included in the above Consolidated Statements of Operations are
charges for stock option compensation (beginning January 1, 2006),
gain on termination of cash flow hedges, restructuring and severance.
The following reconciliation of net earnings shows the breakdown of
these charges and their impact on operations. We believe this
reconciliation provides a meaningful comparison of our ongoing
operations.
Reconciliation of
Non-GAAP Financial
Measures Three Months Ended Twelve Months Ended
--------------------- ---------------------
Dec. 31 Dec. 31 Dec. 31 Dec. 31
2006 2005 2006 2005
---------- ---------- ---------- ----------
Net earnings $ 2,058 $ 17,142 $ 55,055 $ 61,436
Stock option
compensation, net -- (857) -- (4,212)
---------- ---------- ---------- ----------
Net earnings - pro forma 2,058 16,285 55,055 57,224
Adjustments:
Restructuring
charges (a)
Cost of sales 1,119 1,953 5,280 7,427
Selling, general &
administrative
expense 51 (375) 2,123 10,910
Severance (executive) -- -- -- 3,072
Termination of hedge
accounting (b) -- -- (8,503) --
Litigation reserve -- -- 1,300 --
---------- ---------- ---------- ----------
Adjustments - total 1,170 1,578 200 21,409
Income tax (expense)
benefit 410 552 (49) 7,493
---------- ---------- ---------- ----------
Adjustments - net 760 1,026 249 13,916
---------- ---------- ---------- ----------
Net earnings - adjusted $ 2,818 $ 17,311 $ 55,304 $ 71,140
========== ========== ========== ==========
(a) Restructuring charges include asset impairment charges,
severance and other closing costs associated with the previously
announced plant shutdowns.
(b) Excludes impact of $0.02 per share for the fourth quarter and
$0.07 per share for the twelve months related to the increased
interest expense due to the termination of hedge accounting on
an interest rate swap.
FURNITURE BRANDS INTERNATIONAL
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
Dec. 31, Dec. 31,
2006 2005
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 26,565 $ 114,322
Receivables, less allowances of $29,025
($23,368 at December 31, 2005) 362,557 349,202
Inventories 502,070 432,814
Prepaid expenses and other current assets 49,982 35,330
---------- ----------
Total current assets 941,174 931,668
Property, plant and equipment, net 221,398 250,817
Intangible assets 352,323 352,178
Other assets 43,308 47,561
---------- ----------
$1,558,203 $1,582,224
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 10,800 $ --
Accounts payable 94,515 101,860
Accrued expenses and other current
liabilities 83,241 111,625
---------- ----------
Total current liabilities 188,556 213,485
Long-term debt 300,800 301,600
Other long-term liabilities 158,132 163,187
Shareholders' equity 910,715 903,952
---------- ----------
$1,558,203 $1,582,224
========== ==========
FURNITURE BRANDS INTERNATIONAL
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended Twelve Months Ended
------------------ ------------------
Dec. 31 Dec. 31 Dec. 31 Dec. 31
2006 2005 2006 2005
-------- -------- -------- --------
Cash flow from
operating activities:
Net earnings $ 2,058 $ 17,142 $ 55,055 $ 61,436
Adjustments to reconcile
net earnings to net cash
provided (used) by
operating activities:
Depreciation and
amortization 8,398 10,485 36,670 45,240
Compensation expense
related to stock option
grants and restricted
stock awards 1,434 103 6,142 253
Provision (benefit) for
deferred income taxes (7,786) (7,461) (19,012) (11,989)
Other, Net 4 (947) (2,751) 10,084
Changes in operating
assets and liabilities:
Accounts receivable (2,351) (5,700) (13,355) 25,531
Inventories 14,767 2,000 (69,256) 12,014
Prepaid expenses and
other assets 3,236 6,530 (2,795) (6,903)
Accounts payable and
other accrued expenses (38,495) 3,994 (31,971) 28,872
Other long-term
liabilities 1,507 9,645 14,400 24,445
-------- -------- -------- --------
Net cash provided (used)
by operating activities (17,228) 35,791 (26,873) 188,983
-------- -------- -------- --------
Cash flows from investing
activities:
Proceeds from the disposal
of assets 4,984 5,568 9,941 9,829
Additions to property,
plant and equipment (5,067) (7,355) (24,713) (28,541)
-------- -------- -------- --------
Net cash used by investing
activities (83) (1,787) (14,772) (18,712)
-------- -------- -------- --------
Cash flows from financing
activities:
Proceeds from the
termination of swaps -- -- 8,623 --
Payments for debt issuance
costs (95) -- (1,307) --
Additions to long-term
debt 20,000 -- 470,000 --
Payments of long-term debt (10,000) -- 460,800) (800)
Proceeds from the exercise
of stock options 210 107 8,305 7,552
Tax benefit from the
exercise of stock options (116) -- 411 --
Payments of cash dividends (7,733) (7,618) (31,269) (31,267)
Payments for the purchase
of treasury stock -- (30,660) (40,075) (82,682)
-------- -------- -------- --------
Net cash used by financing
activities 2,266 (38,171) (46,112) (107,197)
-------- -------- -------- --------
Net increase (decrease) in
cash and cash equivalents (15,045) (4,167) (87,757) 63,074
Cash and cash equivalents
at beginning of period 41,610 118,489 114,322 51,248
-------- -------- -------- --------
Cash and cash equivalents
at end of period $ 26,565 $114,322 $ 26,565 $114,322
======== ======== ======== ========
Supplemental disclosure:
Cash payments for income
taxes, net $ 9,077 $ 7,755 $ 59,447 $ 40,570
======== ======== ======== ========
Cash payments for interest
expense $ 7,702 $ 2,722 $ 15,581 $ 11,954
======== ======== ======== ========