Furniture Brands International Reports Lower Sales & Earnings

Furniture World Magazine

Furniture Brands International announced its financial results for the fourth quarter and full year ended December 31, 2006. Operating Results -- Fourth Quarter Net sales for the fourth quarter of 2006 were $586.5 million, compared with $593.5 million in the fourth quarter of 2005, a decrease of 1.2%. Net earnings for the fourth quarter were $2.1 million, down from $17.1 million reported for the fourth quarter of last year. Diluted net earnings per common share were $0.04 as compared to $0.34 ($0.32 pro forma for $0.9 million of net stock option expense) in the fourth quarter of last year. Included in the 2006 fourth quarter net earnings were restructuring, asset impairment and severance charges totaling $0.02 per diluted common share and 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 fourth quarter net earnings were negatively impacted by restructuring, asset impairment and severance charges totaling $0.02 per diluted common share. Operating Results -- Full Year 2006 Net sales for the full year of 2006 were $2,418.2 million, compared with $2,386.8 million for the full year of 2005, an increase of 1.3%. Net earnings for the year were $55.1 million as compared to $61.4 million in 2005. Diluted net earnings per common share were $1.13 for the full year 2006 as compared to $1.18 ($1.10 pro forma for $4.2 million of net stock option expense) in year 2005. Included in the 2006 full year net earnings were restructuring, asset impairment and severance charges totaling $0.10 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 $0.07 in increased interest expense; and $0.02 in increased reserves related to a previously disclosed litigation matter. Included in the 2005 full year net earnings were restructuring, asset impairment and severance charges totaling $0.27 per diluted common share. Management Comments W. G. (Mickey) Holliman, Chairman and Chief Executive Officer, commented: "Business conditions in the fourth quarter were difficult across all our companies. As the quarter progressed, retail conditions materially softened. In an effort to continue with our original plan of inventory reduction, we promoted aggressively and took additional discounts on selected slower moving products. We also scheduled additional downtime in our domestic facilities. Both of these items had a significant impact on our earnings for the quarter. "For the full year, our net sales were up slightly but our pro forma net earnings fell considerably short, primarily as a result of such a difficult fourth quarter. As we move into the new year, we continue to drive change throughout the entire company. Though the process of change is difficult, we will gain the benefits of our size, our brands, and our talented leadership team. We will continue to focus on 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 first quarter, the current environment is challenging -- especially when compared to a very strong first quarter a year ago. We expect net sales to be down around 10 percent versus the first quarter of last year and net earnings per diluted common share to be in the $0.12 to $0.16 range. This includes the effect of $0.02 in 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 first quarter expectations in early March." 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.