Furniture Brands International Reports Second Quarter Sales Increase

Furniture World Magazine

Operating Results - Second Quarter: Net sales for the second quarter of 2006 were $601.3 million, compared with $593.8 million in the second quarter of 2005, an increase of 1.3%. Net earnings for the second quarter were $17.0 million, up from $9.6 million in the second quarter of last year. Net earnings per diluted common share were $0.35, as compared to $0.18 in the second quarter of last year ($0.16 pro forma for $1.1 million of net stock option expense). Included in the 2006 second quarter net earnings were restructuring, asset impairment and severance charges totaling $0.5 million ($0.8 million before income tax benefits) or $0.01 per diluted common share. Also included in the 2006 second quarter net earnings was 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 second quarter net earnings were negatively impacted by restructuring, asset impairment and severance charges totaling $7.9 million ($12.2 million before income tax benefits) or $0.15 per diluted common share. Operating Results - First Half: Net sales for the first half of 2006 were $1,262.7 million, compared with $1,235.3 million in the first half of 2005, an increase of 2.2%. Net earnings were $47.2 million, compared with $34.4 million in the first half of 2005. Diluted net earnings per common share were $0.96 as compared to $0.65 in the first half of 2005 ($0.61 pro forma for $2.2 million of net stock option expense). Included in the 2006 first half net earnings were restructuring, asset impairment and severance charges totaling $1.0 million ($1.6 million before income tax benefits) or $0.02 per diluted common share. Also included in the 2006 first half net earnings was $5.4 million ($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, which occurred early in the second quarter. Offsetting this gain was the effect of $0.02 in increased interest expense due to the upfront recognition of the gain on the interest rate swaps. Included in the 2005 first half net earnings were restructuring, asset impairment and severance charges of $10.5 million ($16.2 million before income tax benefits) or $0.19 per common share. Management Comments: W. G. (Mickey) Holliman, Chairman and Chief Executive Officer, commented: "As the quarter progressed we witnessed an increasingly challenging retail environment. Despite this, we delivered a positive year-over-year sales comparison and a meaningful earnings improvement over the prior year." Mr. Holliman continued, "Our net sales and net earnings were also up for the first half compared to the prior year. Earnings per share (excluding restructuring charges, severance, and the impact of the termination of hedge accounting) were 89 cents for the first half of the year. This compares to first half 2005 adjusted net earnings per share of 80 cents. I believe this is the most meaningful year-over-year comparison. We continue to make steady, measurable improvements to the company's performance. "We also continue to drive change throughout the entire company to gain the benefits afforded us by our strong brands, the leverage of our size, and our talented and unified leadership team. We will continue to focus on building our brands, optimizing our logistics and supply chain processes, and other strategic initiatives to drive both growth and margin expansion throughout the company." Mr. Holliman added, "We continue to repurchase shares of our common stock using available free cash flow. During the second quarter we repurchased 0.7 million shares, bringing the total for the first half of 2006 to 1.7 million shares at a total cost of $40 million." Outlook: Mr. Holliman concluded, "With respect to the third quarter, we currently expect net sales to be up in the low single digits versus the third quarter of last year and net earnings per diluted common share to be in the $0.18 to $0.22 range. This includes the effect of $0.07 in previously disclosed 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 third quarter expectations in early September." A conference call will be held to discuss the second quarter results at 7:30 a.m. (Central Time) on July 27, 2006. The call can be listened to on the company's website - www.furniturebrands.com. 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.