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Furniture Brands International Reports 5.1% Sales Decline For Third Quarter

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Furniture Brands International announced the following financial results for the third quarter ended September 30, 2011.

Sales declined 5.1% to $258 million as compared to $272 million reported in the third quarter of 2010
Cost reduction actions implemented with anticipated future annualized cost savings in excess of $30 million and associated charges of $7.5 million.

Total liquidity of $60.5 million at quarter end, comprised of an ending cash balance of $21.2 million and bank facility additional borrowing availability of $39.3 million.

Mr. Ralph Scozzafava, Chairman and CEO stated, "We operate in a discretionary category and the macro headwinds have had an impact on our operating environment, affecting the buying behavior of our target customers. Our focus has been, and continues to be, on controlling our controllables. We cannot, and will not, simply wait for an economic recovery. We have to be proactive in further strengthening our competitive position and improving our cost structure."

Mr. Scozzafava continued, "Our decisions to increase our competitiveness with initiatives like compelling new product introductions at the recent High Point Market and strategic investments in our infrastructure, including the ongoing implementation of SAP and the addition of our low-cost plants in Indonesia and Mexico, will better position us for the future. While these decisions are straightforward and relatively easy to make, cost reduction decisions are extremely difficult, but necessary to support our company's investment in important capabilities and improve our overall cost structure. The cost improvement actions we are executing will result in ongoing annualized cost savings in excess of $30 million and will better position our Company for the future."

Net sales of $258 million for the third quarter of 2011 decreased 5.1% versus net sales of $272 million in the third quarter of 2010. Third quarter 2011 retail sales at the 67 company-owned stores and showrooms totaled $35.9 million, down 2.6% compared with third-quarter 2010 sales at 70 company-owned stores and showrooms. Third-quarter 2011 same-store sales at the 45 Thomasville stores that the company has owned and operated for more than 15 months showed an increase of 5% compared to the third quarter of 2010 when same store sales increased 22%. This represents the seventh consecutive quarter of Thomasville same store sales growth.

Furniture Brands' gross margin for the third quarter of 2011 was 22.3% including a $2.8 million charge associated with the cost reduction initiatives, compared with 24.8% in the third quarter of 2010. Excluding the $2.8 million charge, the decline in gross margin in the third quarter of 2011 as compared to the third quarter of 2010 was largely driven by a timing difference between raw material cost increases and the initiatives put in place to mitigate their impact.

Selling, general and administrative expenses (SG&A) for the third quarter of 2011 totaled $75 million as compared to $70.7 million in the third quarter of 2010. SG&A in the third quarter of 2011 includes a $4.7 million charge associated with the cost reduction actions.

The Company had a pretax loss of $27.3 million in the third quarter of 2011 as compared to a pretax loss of $4.5 million in the third quarter of 2010. The third quarter 2011 pre-tax loss includes the charges described above totaling $7.5 million, as well as a $9 million intangible impairment charge.

For the third quarter of 2011, Furniture Brands had a net loss of $24.5 million, or $0.45 per share compared to a net loss of $2.1 million, or $0.04 per share in the third quarter of 2010. The third quarter 2011 operating loss includes $16.5 million ($13.4 million after-tax, or $0.24 per share) in charges for cost reduction actions and intangible impairments.

The Company ended the quarter with $21.2 million in cash and $39.3 million in bank facility borrowing availability for total liquidity of $60.5 million. Shortly after the quarter ended we completed the sale of our Morganton facility resulting in proceeds of $5.9 million. Our final 2011 pension contribution of $2.5 million was also made in cash after the quarter ended.

"2011 has been an investment year as our cost reduction actions have been accompanied by investment initiatives that strengthen our Company and help drive profitable sales," Mr. Scozzafava added. "As we look to 2012, we expect to have positive free cash flow, largely driven by improved operating performance and a return of capital expenditures to more normalized levels, as much of our investment spend is behind us. The entire Furniture Brands organization is focused on driving sales by developing compelling product at an attractive value, consistently improving our cost structure and efficiencies, prudently allocating capital and most importantly, progressing towards profitability," Mr. Scozzafava concluded.

About Furniture Brands: Furniture Brands International (NYSE:FBN - News) is one of the world's leading designers, manufacturers, sourcers, wholesalers, and retailers of home furnishings. We market through a wide range of retail channels, from mass merchant stores to single-branded and independent dealers to specialized interior designers. We serve our customers through some of the best known and most respected brands in the furniture industry, including Broyhill, Lane, Thomasville, Drexel Heritage, Henredon, Hickory Chair, Pearson, Laneventure, Maitland-Smith, and Creative Interiors.

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