ST. LOUIS, May 2, 2007 (PRIME NEWSWIRE) -- Furniture Brands International (NYSE:FBN) announced today its financial results for the first quarter ended March 31, 2007.
Operating Results - First Quarter
Net sales for the first quarter of 2007 were $573.7 million, compared with $661.4 million in the first quarter of 2006, a decrease of 13%. Net earnings for the first quarter were $2.9 million, down from $30.2 million in the first quarter of last year. Diluted net earnings per common share were $0.06 as compared to $0.61 in the first quarter of last year.
Included in the 2007 first 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 of last year, as previously announced. That gain amounted to $0.11 per diluted common share and is included in the 2006 first quarter reported net earnings. Negatively impacting the 2006 first quarter net earnings were restructuring, asset impairment and severance charges totaling $0.01 per diluted common share.
Management Comments
W. G. (Mickey) Holliman, Chairman and Chief Executive Officer, commented: "Business conditions in the first quarter were difficult across all our companies. Already soft retail conditions worsened as the quarter progressed. The earnings shortfall was largely attributable to the soft business environment. We were pleased to report strong cash flow in the quarter, and we are pleased our balance sheet now shows a cash balance more in line with historical trends.
"Recently we announced a major headcount reduction and manufacturing realignment. These were difficult but necessary decisions designed to eliminate costs and keep the business appropriately sized in the face of challenging conditions. We will continue to pursue opportunities to reduce costs as we move forward."
Mr. Holliman continued, "Concerning our debt, we disclosed in our 10-K filing last March we were negotiating a temporary amendment to our borrowings with our banks and senior note holders. We are pleased to report we have completed those negotiations. The amendment allows us until the end of June to put in place more permanent financing arrangements. We expect this will be achieved in that timeframe. While we are operating under this temporary amendment, our outstanding debt has been reclassified as a current liability on the balance sheet."
Outlook
Mr. Holliman concluded, "With respect to the second quarter, we do not see an improving marketplace, and as a result we expect net sales to be down around 15 percent versus the second quarter of last year. We expect net earnings per diluted common share to reflect a loss in the $0.11 to $0.07 range. This includes the effect of $0.02 in restructuring, asset impairment and severance charges. The company will no longer call out the increased interest expense as a special item as the expense will be on a comparable basis with the prior year. As is our practice, we will provide an update on our second quarter expectations in early June."
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 first quarter results at 7:30 a.m. (Central Time) on May 3, 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
---------------------
March 31,
2007 2006
-------- --------
Net sales $573,749 $661,445
Cost of sales 449,514 507,506
-------- --------
Gross profit 124,235 153,939
Selling, general & administrative expense 114,830 116,564
-------- --------
Earnings from operations 9,405 37,375
Interest expense 5,073 2,961
Other income, net 440 10,538
-------- --------
Earnings before income tax expense 4,772 44,952
Income tax expense 1,895 14,730
-------- --------
Net earnings $ 2,877 $ 30,222
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Net earnings per common share (diluted) $ 0.06 $ 0.61
Average diluted common shares
outstanding (in thousands) 48,336 49,569
Included in the above Consolidated Statements of Operations are
restructuring charges and the impact of terminating a cash flow hedge
(terminated effective March 31, 2006). 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
-------------------
March 31,
2007 2006
-------- --------
Net earnings $ 2,877 $ 30,222
Adjustments:
Restructuring charges (a)
Cost of sales 431 430
Selling, general & administrative expense 748 344
Termination of hedge accounting (b) -- (8,503)
-------- --------
Adjustments - total 1,179 (7,729)
Income tax (expense) benefit 413 (2,824)
-------- --------
Adjustments - net 766 (4,905)
-------- --------
Net earnings - adjusted $ 3,643 $ 25,317
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(a) Restructuring charges include asset impairment charges,
severance and other closing costs associated with previously
announced plant shutdowns.
(b) Excludes impact of $0.02 per share for the first quarter of
2007 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)
March 31, December 31,
2007 2006
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 47,961 $ 26,565
Receivables, less allowances of $24,646
($29,025 at December 31, 2006) 356,489 362,557
Inventories 496,489 502,070
Prepaid expenses and other current assets 45,799 49,982
---------- ----------
Total current assets 946,738 941,174
Property, plant and equipment, net 220,511 221,398
Intangible assets 352,323 352,323
Other assets 38,183 43,308
---------- ----------
$1,557,755 $1,558,203
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 300,800 $ 10,800
Accounts payable 99,704 94,515
Accrued expenses and other
current liabilities 88,876 83,241
---------- ----------
Total current liabilities 489,380 188,556
Long-term debt 800 300,800
Other long-term liabilities 158,736 158,132
Shareholders' equity 908,839 910,715
---------- ----------
$1,557,755 $1,558,203
========== ==========
FURNITURE BRANDS INTERNATIONAL
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended
--------------------
March 31,
2007 2006
-------- --------
Cash flow from operating activities:
Net earnings $ 2,877 $ 30,222
Adjustments to reconcile net earnings to
net cash provided (used) by operating
activities:
Depreciation and amortization 8,242 10,093
Compensation expense related to stock option
grants and restricted stock awards 1,029 1,623
Provision (benefit) for deferred income taxes (425) (883)
Other, Net 818 (7,675)
Changes in operating assets and liabilities:
Accounts receivable 4,655 (44,014)
Inventories 12,023 (6,498)
Prepaid expenses and other assets 5,785 (399)
Accounts payable and other accrued expenses 5,229 17,143
Other long-term liabilities 4,922 4,579
-------- --------
Net cash provided by operating activities 45,155 4,191
-------- --------
Cash flows from investing activities:
Acquisition of stores, net of cash acquired (4,241) --
Proceeds from the disposal of assets 2,358 3,183
Additions to property, plant and equipment (4,142) (5,356)
-------- --------
Net cash used by investing activities (6,025) (2,173)
-------- --------
Cash flows from financing activities:
Additions to long-term debt 4,000 --
Payments of long-term debt (14,000) --
Proceeds from the exercise of stock options -- 6,769
Tax benefit from the exercise of stock options -- 404
Payments of cash dividends (7,734) (7,959)
Payments for the purchase of treasury stock -- (25,000)
-------- --------
Net cash used by financing activities (17,734) (25,786)
-------- --------
Net increase (decrease) in cash and
cash equivalents 21,396 (23,768)
Cash and cash equivalents at beginning
of period 26,565 114,322
-------- --------
Cash and cash equivalents at end of period $ 47,961 $ 90,554
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Supplemental disclosure:
Cash payments for income taxes, net $ 379 $ 18,033
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Cash payments for interest expense $ 2,619 $ 1,679
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