Furniture Brands International Reports Third Quarter Sales and Earnings

Furniture World Magazine

Furniture Brands International announced its financial results for the third quarter of 2006. Operating Results – Third Quarter Net sales for the third quarter of 2006 were $568.9 million, compared with $557.9 million in the third quarter of 2005, an increase of 2%. Net earnings for the third quarter were $5.8 million, down from $9.9 million reported for the third quarter of last year. Diluted net earnings per common share were $0.12 as compared to $0.19 ($0.17 pro forma for $1.1 million of net stock option expense) in the third quarter of last year. Included in the 2006 third quarter net earnings were restructuring, asset impairment and severance charges totaling $0.06 per diluted common share; the effect of $0.03 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; and $0.02 in increased reserves related to a previously disclosed litigation matter. The 2005 third quarter net earnings were negatively impacted by restructuring, asset impairment and severance charges totaling $0.05 per diluted common share. Operating Results – Nine Months Net sales for the first nine months of 2006 were $1,831.6 million, compared with $1,793.2 million in the first nine months of 2005, an increase of 2%. Net earnings for the nine months were $53.0 million as compared to $44.3 million in the first nine months of 2005. Diluted net earnings per common share were $1.08 for the nine months as compared to $0.84 ($0.78 pro forma for $3.4 million of net stock option expense) in the first nine months of 2005. Included in the 2006 nine months net earnings were restructuring, asset impairment and severance charges totaling $0.08 per diluted common share; $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 but offsetting this gain was the effect of $0.05 in increased interest expense; and $0.02 in increased reserves related to a previously disclosed litigation matter. Included in the 2005 nine months net earnings were restructuring, asset impairment and severance charges totaling $0.24 per diluted common share. Management Comments W. G. (Mickey) Holliman, Chairman and Chief Executive Officer, commented: “As the third quarter progressed we witnessed an increasingly challenging retail environment. Despite this, we delivered a positive year-over-year sales comparison and our net earnings were basically flat on a pro forma basis.” Mr. Holliman continued, “Our net sales and net earnings were up for the first nine months compared to the prior year. Net earnings per common share (excluding restructuring charges, severance, the impact of the termination of hedge accounting, and the increased reserves related to a previously disclosed litigation matter) were $1.12 for the first nine months of the year. This compares to adjusted net earnings per common share of $1.02 for the first nine months of 2005. I believe this is the most meaningful year-over-year comparison. We continue to work toward steady, measurable improvements to the company. “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.” Outlook Mr. Holliman concluded, “With respect to the fourth quarter, we currently expect net sales to be flat versus the fourth quarter of last year and net earnings per diluted common share to be in the $0.11 to $0.15 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 fourth quarter expectations in early December.” 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.