* $49.5 million in cash flow from operating activities in Q4 2007 driven by strong working capital management * Year-end cash is highest, debt is lowest since recapitalization in 1992 * $10 million of debt paid down in 2007; Additional $20 million of debt paid down in January 2008 * Inventories down $100.7 million to $401.3 million through aggressive reductions * Operating interventions and restructuring activities result in $40.7 million net loss in Q4 2007 * Guidance for 2008 earnings per share in range of $0.40 to $0.60 * Quarterly dividend declared at $0.04 per share; incremental available cash targeted for strategic investments and debt reduction
ST. LOUIS, Jan. 30, 2008 (PRIME NEWSWIRE) -- Furniture Brands International (NYSE:FBN) announced today its financial results for the fourth quarter and full year ended December 31, 2007.
Net sales for the fourth quarter of 2007 were $504.8 million, compared with $572.8 million in the fourth quarter of 2006, a decrease of 11.9%. Net loss from continuing operations for the fourth quarter of 2007 was $41.8 million, down from $1.0 million of earnings in the same quarter of the prior year. Diluted net loss per common share from continuing operations was $0.86, compared with diluted net earnings per common share of $0.02 in the fourth quarter of last year. Cash flow from operating activities for the fourth quarter of 2007 was $49.5 million, compared with cash used of $17.2 million for the same quarter of 2006.
Net sales for the full year of 2007 were $2.1 billion, compared with $2.4 billion for the full year of 2006, a decrease of 11.8%. Net loss from continuing operations for fiscal 2007 was $51.2 million, down from $49.9 million of earnings in 2006. Diluted net loss per common share from continuing operations was $1.06 for the full year of 2007 as compared with diluted net earnings per common share of $1.02 in 2006. Cash flow from operating activities for the full year of 2007 was $152.9 million as compared with cash used of $26.9 million for 2006.
As previously announced, the Company intends to divest Hickory Business Furniture ("HBF"), its business furniture operation, in the first quarter of fiscal 2008. Accordingly, HBF has been reported as a discontinued operation. Net earnings from discontinued operations were $5.6 million and $5.1 million for the 12 months ended December 31, 2007 and 2006, respectively.
Ralph P. Scozzafava, the company's Vice-Chairman of the Board and Chief Executive Officer, commented: "At our Investor Conference in October we unveiled the major elements of our new strategic direction, which we are executing aggressively. These include building on the strengths of our industry-leading brands, winning with customers by delivering to their expectations, achieving operational excellence, and growing and developing our people. In pursuit of this plan we have already undertaken a number of initiatives, all designed to grow our business, to make our numbers, and to beat our competition. But, as I said in October, many of these initiatives have involved implementation costs and other effects that have negatively impacted our results in the fourth quarter and the full year 2007.
"We undertook these initiatives proactively and voluntarily because they will provide the best long-term outcomes for our shareholders, customers, and associates. We have now completed a number of previously announced matters, such as closing 18 company-owned stores; closing five facilities; selected staffing reductions at our Lane, Thomasville, Drexel Heritage and Henredon businesses; and, targeted inventory reduction programs. These changes were costly in the quarter but they will improve results going forward."
Costs associated with these strategic initiatives and other matters are included in the company's reported results. On a pre-tax basis, these costs totaled $38.0 million in the fourth quarter of 2007 and $85.0 million for the full year of 2007. A summary of these costs is included in the tables accompanying this release.
Mr. Scozzafava added, "Our strategic plan was developed with a three-stage timeline: an initial focus on cash generation and balance sheet stability in 2007, followed by improvements in profitability and then a sharp focus on increasing sales. Our efforts in 2007 were successful. We paid down $10 million of our long-term debt in 2007. And, through a combination of better working-capital management, tight control of capital spending, and selected sales of non-strategic assets, our year-end 2007 cash balance totaled $138.8 million, $20 million of which was restricted and used to pay down debt in January 2008. This puts Furniture Brands with the most cash on hand and the least debt outstanding at any year-end since the company recapitalized in 1992. We'll use that strong cash position to repay another $15 million in long-term debt in mid-February, which is another example of our aggressive execution of the new strategy."
Outlook
Mr. Scozzafava continued, "The elements of our strategic plan are being embraced throughout the organization and by our customers. We have installed several new members of the senior management team who have taken full ownership for our results under this plan. Joining the Furniture Brands Executive Leadership Team in the past year are:
* Dan Bradley, President of the Designer Group * Jeff Cook, President of Broyhill * Alex Hodges, Chief Marketing Officer * Skipper Holliman, President of Lane * Mike McBreen, Vice President of Logistics and Supply Chain * Ed Teplitz, President of Thomasville
"The leadership team has already begun to deliver on the key building blocks for improved operations going forward. Since our investor meeting in October, we have established Asian supply chain and logistics offices, optimized our domestic network of warehouses, streamlined IT infrastructure, and consolidated purchasing of raw materials, transportation services, and employee benefits.
"In 2008 we will continue to drive toward increasing profitability through improved supply chain activities and by continuing the consolidation of corporate services. We are already seeing the positive effects of many of the cost-savings initiatives we undertook in 2007. As we progress through the year, we will see even greater benefits as we put many of the implementation costs behind us."
Quarterly Dividend Declared
The Board of Directors declared today a quarterly dividend of $0.04 per common share payable February 29, 2008 to shareholders of record at the close of business on February 11, 2008.
"As part of our commitment to managing cash carefully and deploying it to strategically grow the company, the Board has approved a reduction in our quarterly dividend to $0.04 per share from $0.16 per share as we focus on delivering shareholder value through a strong execution of our strategy," Mr. Scozzafava said.
"Our decision to reduce the dividend and reinvest available cash back into the business is consistent with our strategic plan. By adopting a dividend payout that reflects current industry conditions, we continue to return value to our shareholders while allowing us to make strategic investments in key parts of our business -- our brands, our customers, our operations, and our people. We have ample liquidity to execute the strategic plan, as well as to selectively reduce our long-term debt.
Earnings Guidance
"Our strategy will translate into improved financial performance. As previously announced, we have adopted a new policy regarding earnings guidance. In keeping with public company best practices, we will provide full year sales and earnings guidance at the beginning of each fiscal year and we will update or affirm this annual guidance at our regular quarterly conference calls.
"With respect to revenues in fiscal year 2008, we find that current business conditions continue to be as challenging as they have been throughout the second half of 2007. We see little in the marketplace suggesting a near-term improvement in revenues on a year-over-year basis. Accordingly, and excluding the sales of HBF, we expect sales in 2008 to be in the $1.9 billion to $2.0 billion range. Nevertheless, we expect the quality of our sales and resulting margins to be better as we optimize our portfolio and we work with customers to drive profitable volume.
"Because of our 2007 strategic actions on inventory levels, store closings and headcount reductions, we expect 2008 diluted net earnings per common share, on a GAAP-reported basis, to be in the $0.40 to $0.60 range. This guidance is on a continuing operations basis, excluding the results of HBF.
"Our full year guidance for 2008 includes the effect of all anticipated restructuring, asset impairment and severance charges. Going forward, we do not intend to segregate these charges unless required by applicable accounting rules, although we will provide supplemental detail on these costs to assist in financial modeling. We believe this will lend itself to greater simplicity and transparency in our earnings reporting.
"We continue to move forward aggressively with our strategic plan," Mr. Scozzafava concluded. "At the top line, some of our commercial initiatives are already taking shape with enhanced focus on new marketing efforts and customer initiatives. On the cost side, we have begun to leverage our scale in procurement, operating expense programs, and information technology infrastructure, and we are establishing our on-the-ground supply chain organization in China. This will be a long journey, but we are firmly on our way."
Upcoming Investor Events
A conference call will be held to discuss the fourth quarter and full year results at 7:30 a.m. (Central Time) on January 31, 2008. The call can be accessed on the company's website at furniturebrands.com under "Investor Info". Access to the call and the release will be archived for one year.
About Furniture Brands
Furniture Brands International (NYSE:FBN) is a vertically integrated operating company that is one of the nation's leading designers, manufacturers, and retailers of home furnishings. With annual sales of approximately $2 billion, it markets through a wide range of retail channels, from mass merchant stores to single-brand and independent dealers to specialized interior designers. Furniture Brands serves its customers through some of the best known and most respected brands in the furniture industry, including Broyhill, Lane, Thomasville, Drexel Heritage, Henredon, Pearson, Hickory Chair, Laneventure, and Maitland-Smith.
The Furniture Brands International logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=2757
Cautionary Statement Regarding Forward-Looking Statements
Matters discussed in this release and in our public disclosures, whether written or oral, relating to future events or our future performance, including any discussion, express or implied, of our anticipated growth, operating results, future earnings per share, plans and objectives, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements under the caption "Earnings Guidance." These statements are often identified by the words "will," "believe," "positioned," "estimate," "project," "target," "continue," "intend," "expect," "future," "anticipates," and similar expressions that are not statements of historical fact. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Our actual results and timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2006, our quarterly reports on Form 10-Q, elsewhere in this release, and in our other public filings with the Securities and Exchange Commission. Such factors include, but are not limited to: risks associated with the execution of our strategic plan; changes in economic conditions; loss of market share due to competition; failure to forecast demand or anticipate or respond to changes in consumer tastes and fashion trends; failure to achieve projected mix of product sales; business failures of large customers; distribution and cost savings programs; manufacturing realignments; increased reliance on offshore (import) sourcing of various products; fluctuations in the cost, availability and quality of raw materials; product liability uncertainty; environmental regulations; future acquisitions; impairment of goodwill and other intangible assets; anti-takeover provisions which could result in a decreased valuation of our common stock; loss of funding sources; and our ability to open and operate new retail stores successfully. It is routine for internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that all forward-looking statements and the internal projections and beliefs upon which we base our expectations included in this report or other periodic reports are made only as of the date made and may change. While we may elect to update forward-looking statements at some point in the future, we do not undertake any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
FURNITURE BRANDS INTERNATIONAL
CONDENSED CONSOLIDATED OPERATING RESULTS
(in thousands except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
---------------------- ----------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2007 2006 2007 2006
---------- ---------- ---------- ----------
Net sales $ 504,786 $ 572,843 $2,082,056 $2,361,680
Cost of sales 419,484 460,713 1,665,961 1,853,805
---------- ---------- ---------- ----------
Gross profit 85,302 112,130 416,095 507,875
Selling, general &
administrative
expenses 149,025 110,529 469,434 432,336
---------- ---------- ---------- ----------
Earnings (loss) from
operations (63,723) 1,601 (53,339) 75,539
Interest expense 5,528 5,079 37,388 17,665
Other income, net 2,221 1,405 10,249 14,825
---------- ---------- ---------- ----------
Earnings (loss) from
continuing operations
before income tax
expense (67,030) (2,073) (80,478) 72,699
Income tax expense
(benefit) (25,221) (3,101) (29,261) 22,784
---------- ---------- ---------- ----------
Net earnings (loss)
from continuing
operations (41,809) 1,028 (51,217) 49,915
Net earnings from
discontinued
operations 1,131 1,030 5,568 5,140
---------- ---------- ---------- ----------
Net earnings (loss) $ (40,678) $ 2,058 $ (45,649) $ 55,055
========== ========== ========== ==========
Earnings (loss) per
common share -
Basic and Diluted:
Earnings (loss)
from continuing
operations $ (0.86) $ 0.02 $ (1.06) $ 1.02
Earnings from
discontinued
operations 0.02 0.02 0.12 0.11
---------- ---------- ---------- ----------
Net earnings (loss) $ (0.84) $ 0.04 $ (0.94) $ 1.13
========== ========== ========== ==========
Weighted average
common shares
outstanding -
- Basic and Diluted 48,503 48,334 48,446 48,753
Selected Items Included in Consolidated Statement of Operations
The following items are included in our Statements of Operations for
the periods indicated and are the result of our strategic initiatives
and other matters.
Three Months Ended Twelve Months Ended
---------------------- ----------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2007 2006 2007 2006
---------- ---------- ---------- ----------
(in thousands)
Selected items (increasing) decreasing earnings before income tax
expense:
Restructuring charges (1)
Cost of sales $ 3,123 $ 1,119 $ 5,784 $ 5,280
Selling, general &
administrative
expenses 20,973 51 22,091 2,123
Debt refinancing (2) -- -- 11,101 (8,503)
Asset impairment (3) -- -- 7,100 --
Gain on sale of
plane (4) -- -- (2,939) --
Increase in sales
discounts (5) 2,100 -- 28,300 --
Increase in
receivable
reserves (6) 11,800 -- 13,600 --
Litigation reserve -- -- -- 1,300
---------- ---------- ---------- ----------
Total $ 37,996 $ 1,170 $ 85,037 $ 200
========== ========== ========== ==========
(1) Restructuring charges include asset impairment, severance, and
other closing costs associated with the previously announced plant
shutdowns; severance costs from selected staffing reductions; and
fixed asset, lease, severance, and other closing costs of previously
announced retail store closures.
(2) For the twelve months ended December 31, 2007, amount includes a
gain of $4.1 million in Other Income from discontinuing hedge
accounting on a treasury lock agreement as a result of the
anticipated refinancing of the senior notes in the third quarter of
2007; a make-whole payment, which resulted in additional interest
expense of $14.2 million; and a charge to interest expense of $1.0
million resulting from the write-off of the deferred financing fees
associated with the refinanced debt. For the twelve months ended
December 31, 2006, represents the gain from the termination of hedge
accounting on an interest rate swap due to the refinancing of the
revolving credit facility in the second quarter of 2006 recorded in
other income.
(3) Represents an impairment charge recorded in selling, general &
administrative expenses in third quarter of 2007 reducing the
carrying value of certain trade names to their estimated fair value.
(4) Represents the gain on the sale of our plane recorded in selling,
general, & administrative expense in the third quarter of 2007, which
is consistent with our strategy to sell non-strategic assets.
(5) Represents an increase in sales discounts of $2.1 million and
$28.3 million recorded in the fourth quarter and full year of 2007,
respectively, as compared to the same periods in 2006.
(6) Represents an increase in receivable reserves recorded in
selling, general & administrative expenses in 2007 as compared to
2006.
FURNITURE BRANDS INTERNATIONAL
CONDENSEND CONSOLIDATED BALANCE SHEETS
(in thousands)
Dec. 31, Dec. 31,
2007 2006
(Unaudited)
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 118,764 $ 26,565
Cash - Restricted 20,000 --
Receivables, less allowances of $45,467
($29,025 at December 31, 2006) 292,694 362,557
Inventories 401,302 502,070
Prepaid expenses and other current assets 54,858 49,982
Current assets of discontinued operations 12,236 --
----------- -----------
Total current assets 899,854 941,174
Property, plant and equipment, net 178,564 221,398
Intangible assets 329,927 352,323
Other assets 36,770 43,308
Noncurrent assets of discontinued
operations 17,963 --
----------- -----------
$ 1,463,078 $ 1,558,203
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 20,800 $ 10,800
Accounts payable 93,557 94,515
Accrued expenses and other current
liabilities 67,735 83,241
Current liabilities of discontinued
operations 5,307 --
----------- -----------
Total current liabilities 187,399 188,556
Long-term debt 280,000 300,800
Other long-term liabilities 150,772 158,132
Noncurrent liabilities of discontinued
operations 141 --
Shareholders' equity 844,766 910,715
----------- -----------
$ 1,463,078 $ 1,558,203
=========== ===========
FURNITURE BRANDS INTERNATIONAL
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(Unaudited)
Twelve Months Ended
-------------------------
Dec. 31, Dec. 31,
2007 2006
----------- -----------
Cash flows from operating activities:
Net earnings (loss) $ (45,649) $ 55,055
Adjustments to reconcile net earnings
to net cash provided (used) by
operating activities:
Depreciation and amortization 29,982 36,670
Compensation expense related to
stock option grants and restricted
stock awards 3,251 6,142
Tax benefit from the exercise of
stock options -- 411
Provision (benefit) for deferred
income taxes (25,348) (15,384)
Other, net 15,304 (5,915)
Changes in operating assets and
liabilities:
Accounts receivable 63,627 (13,355)
Inventories 100,019 (69,256)
Prepaid expenses and other assets 9,707 (2,795)
Accounts payable and other accrued
expenses (12,482) (31,971)
Other long-term liabilities 14,478 13,525
----------- -----------
Net cash provided (used) by operating
activities 152,889 (26,873)
----------- -----------
Cash flows from investing activities:
Acquisition of stores, net of cash
acquired (4,241) --
Proceeds from the disposal of assets 23,161 9,941
Additions to property, plant and
equipment (14,374) (24,713)
----------- -----------
Net cash used by investing activities 4,546 (14,772)
----------- -----------
Cash flows from financing activities:
Proceeds from the termination of swaps -- 8,623
Payments for debt issuance costs (3,424) (1,307)
Additions to long-term debt 325,401 470,000
Payments of long-term debt (336,201) (460,800)
Cash restricted for payment of current
maturities of long-term debt (20,000) --
Proceeds from the exercise of stock
options -- 8,305
Tax benefit from the exercise of
stock options -- 411
Payments of cash dividends (31,012) (31,269)
Payments for the purchase of
treasury stock -- (40,075)
----------- -----------
Net cash used by financing activities (65,236) (46,112)
----------- -----------
Net increase (decrease) in cash and cash
equivalents 92,199 (87,757)
Cash and cash equivalents at beginning
of period 26,565 114,322
----------- -----------
Cash and cash equivalents at end of period $ 118,764 $ 26,565
=========== ===========
Supplemental disclosure:
Cash payments for income taxes, net $ 1,776 $ 59,447
=========== ===========
Cash payments for interest expense $ 34,689 $ 15,581
=========== ===========