Furniture Brands International Announces Third Quarter 2002 Financial Results

Business Wire, Oct 23, 2002

Business Editors

ST. LOUIS--(BUSINESS WIRE)--Oct. 23, 2002

Furniture Brands International (NYSE:FBN) announced today its financial results for the third quarter and first nine months of 2002.

Net Sales

Net sales for the third quarter of 2002 were $563.2 million, compared with $448.7 million in the third quarter of 2001, an increase of 25.5%. For the nine months, net sales were $1,802.2 million, compared with $1,414.5 million in the same period of 2001, an increase of 27.4%. Excluding the impact of Henredon, Drexel Heritage and Maitland-Smith, which the company acquired as of the close of business on December 28, 2001, the company's sales (Broyhill, Lane and Thomasville) showed year-over-year growth of 4.5% in the quarter and 6.7% in the nine months.

Net Earnings

Net earnings for the third quarter were $24.6 million as compared to $13.9 million in the third quarter of last year. Diluted net earnings per common share were $0.44 as compared to $0.27 in the third quarter of 2001. Excluding all restructuring charges recorded in the third quarter of 2001, the company's diluted net earnings per common share in that quarter would have been $0.29. Effective January 1, 2002, the company adopted FAS #142, which eliminated the amortization of goodwill and other intangible assets with indefinite lives. Had FAS #142 been effective in the third quarter of 2001, and excluding the restructuring charges mentioned above, net earnings per common share in the quarter would have been $0.34, indicating a 29.4% increase in 2002 earnings versus the comparable period in 2001. Net earnings for the nine months were $89.5 million or $1.59 per diluted common share as compared to $35.2 million or $0.69 per diluted common share in the same period of 2001. Had FAS#142 been effective in the first nine months of 2001, and excluding asset impairment and other restructuring charges, diluted net earnings per common share would have been $1.12.

Management Comments

"In the current difficult business environment, we are pleased to report these year over year increases in sales," stated W. G. (Mickey) Holliman, Chairman, President and Chief Executive Officer. "Though only half our businesses continue to show favorable gains, and even those have moderated somewhat from their highs earlier in the year, we have been able to post a meaningful increase in net earnings and earnings per share.

"While business remains comparatively strong at Broyhill and Lane, the companies at the higher-end of our product line -- Thomasville, Henredon, Drexel Heritage and Maitland-Smith - continue to show flat to slightly down orders year over year. We see nothing to date that would indicate a turnaround in business at the high-end anytime before the end of this year.

"With respect to operating earnings and margin performance, the third quarter is seasonally the weakest due to slower retail activity and plant vacation shutdowns," Mr. Holliman continued. "Additionally, the quarter was negatively impacted by two plant closures, some discount programs designed to stimulate sales, and our ongoing transition to a higher level of offshore sourcing.

"The good news is that, despite a buildup in inventories caused by seasonal needs and the rapidly expanding import program, we had another strong quarter in terms of operating cash flow. We reduced our long-term debt by $30.6 million during the quarter and we have now achieved our long-stated target of 30% debt-to-book capitalization. Our ability to generate substantial cash flow from operations, even in a challenging business environment, along with a strong balance sheet gives us the flexibility to invest wisely as growth opportunities are presented."

Outlook

Mr. Holliman concluded, "Having just completed the fall International Home Furnishings Market, we are excited about retailer response to our product offerings and business strategy, and we expect continued market share expansion as a result.

"We believe our fourth quarter sales growth - excluding the acquisitions - will be essentially flat with the same period last year and we expect our earnings per share for the quarter to be in the $0.50 to $0.55 range. This would indicate a full-year expectation in the range of $2.09 to $2.14. As has been our practice, we will provide an update on our fourth quarter expectation in early December."

Furniture Brands International is America's largest home furnishings manufacturer, manufacturing and sourcing its products under six of the best-known brand names in the industry - Broyhill, Lane, Thomasville, Henredon, Drexel Heritage and Maitland-Smith. The company markets its products across a broad spectrum of price categories and distributes its products through an extensive system of independently owned national, regional and local retailers.

This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include the company's expected earnings per share, the prospects for the overall business environment, and other statements containing the words "expects," "anticipates," "estimates," "believes," and words of similar import. The company cautions investors that any such forward-looking statements are not guarantees of future performance and that certain factors may cause actual results to differ materially from those in the forward-looking statements. Such factors may include: overall business and economic conditions and growth in the furniture industry; changes in customer spending patterns and demand for home furnishings; competitive factors, such as design and marketing efforts by other furniture manufacturers; pricing pressures; success of the marketing efforts of retailers and the prospects for further customer failures; the company's success in furniture design and manufacture; the effects of manufacturing realignments and cost savings programs; and other risk factors listed from time to time in the company's public releases and SEC reports, including but not limited to the most recent reports on Forms 10-Q and 10-K. The company also cautions investors that our forecast for the fourth quarter and the year 2002 represents our outlook only as of this date, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise.