Fbi Wind Down (FBN) 10-Q 2005 Q3 Quarterly report

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

	(Mark one)
(X)	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2005 or
	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ____________ to ____________
	Commission file number I-91

Furniture Brands International, Inc.

(Exact name of registrant as specified in its charter)

Delaware	43-0337683
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

101 South Hanley Road, St. Louis, Missouri	63105
(Address of principal executive offices)	(Zip Code)

(Registrant's telephone number, including area code) (314) 863-1100

Former name, former address and former fiscal year, if changed since last report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No

 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12 b-2 of the Exchange Act).

Yes X No

APPLICABLE ONLY TO CORPORATE ISSUERS

 Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

50,856,558 shares as of October 31, 2005

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Financial Statements for the quarter ended September 30, 2005.

Consolidated Balance Sheets

Consolidated Statements of Operations:

Three Months Ended September 30, 2005

Three Months Ended September 30, 2004

Nine Months Ended September 30, 2005

Nine Months Ended September 30, 2004

Consolidated Statements of Cash Flows:

Nine Months Ended September 30, 2005

Nine Months Ended September 30, 2004

Notes to Consolidated Financial Statements

The financial statements are unaudited, but include all adjustments (consisting of normal recurring adjustments) which the management of the Company considers necessary for a fair presentation of the results of the period. The results for the three months and nine months ended September 30, 2005 are not necessarily indicative of the results to be expected for the full year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2004.

FURNITURE BRANDS INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)

	September 30,			December 31,
	2005			2004
ASSETS
Current assets:
Cash and cash equivalents	$	118,489		$	51,248
Receivables, less allowances of $24,434
($20,919 at December 31, 2004)		343,502			374,733
Inventories (Note 1)		434,814			444,828
Deferred income taxes		27,960			28,044
Prepaid expenses and other current assets		10,087			9,272
Total current assets		934,852			908,125
Property, plant and equipment		687,449			682,596
Less accumulated depreciation		430,435			397,623
Net property, plant and equipment		257,014			284,973
Goodwill		183,097			183,097
Other intangible assets		169,671			169,671
Other assets		55,083			41,893
	$	1,599,717		$	1,587,759
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	96,600		$	85,363
Accrued expenses and other current liabilities		119,664			111,647
Total current liabilities		216,264			197,010
Long-term debt		301,600			302,400
Deferred income taxes		74,681			78,305
Other long-term liabilities		70,332			52,561
Shareholders' equity:
Preferred stock, authorized 10,000,000
shares, no par value - issued, none		-			-
Common stock, authorized 200,000,000 shares,
$1.00 stated value - issued 56,482,541
shares at September 30, 2005 and December 31, 2004		56,483			56,483
Paid-in capital		221,679			226,602
Retained earnings		810,501			789,856
Accumulated other comprehensive income (expense) (Note 3)		(29,408	)		(31,076	)
Treasury stock at cost (5,273,632 shares at
September 30, 2005 and 3,266,456 shares at
December 31, 2004)		(122,415	)		(84,382	)
Total shareholders' equity		936,840			957,483
	$	1,599,717		$	1,587,759

See accompanying notes to consolidated financial statements.

FURNITURE BRANDS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands except per share data)

(Unaudited)

	Three Months		Three Months
	Ended		Ended
	September 30,		September 30,
	2005		2004
Net sales	$	557,927	$	574,800
Cost of sales		427,076		429,182
Gross profit		130,851		145,618
Selling, general and administrative expenses		114,042		112,685
Earnings from operations		16,809		32,933
Interest expense		3,146		3,472
Other income, net		903		616
Earnings before income tax expense		14,566		30,077
Income tax expense		4,647		10,654
Net earnings	$	9,919	$	19,423
Net earnings per common share:
Basic	$	0.19	$	0.36
Diluted	$	0.19	$	0.36
Weighted average common shares outstanding (Note 2):
Basic		51,616,863		53,977,708
Diluted		51,707,929		54,339,020

See accompanying notes to consolidated financial statements.

FURNITURE BRANDS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands except per share data)

(Unaudited)

	Nine Months		Nine Months
	Ended		Ended
	September 30,		September 30,
	2005		2004
Net sales	$	1,793,245	$	1,845,449
Cost of sales		1,353,819		1,370,075
Gross profit		439,426		475,374
Selling, general and administrative expenses		367,470		356,952
Earnings from operations		71,956		118,422
Interest expense		9,094		12,332
Other income, net		3,437		1,790
Earnings before income tax expense		66,299		107,880
Income tax expense		22,005		38,646
Net earnings	$	44,294	$	69,234
Net earnings per common share:
Basic	$	0.84	$	1.26
Diluted	$	0.84	$	1.24
Weighted average common shares outstanding (Note 2):
Basic		52,498,436		55,156,403
Diluted		52,653,801		55,783,652

See accompanying notes to consolidated financial statements.

FURNITURE BRANDS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Nine Months			Nine Months
	Ended			Ended
	September 30,			September 30,
	2005			2004
Cash flows from operating activities:
Net earnings	$	44,294		$	69,234
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization		34,755			36,930
Other, net		11,181			801
Changes in operating assets and liabilities:
Accounts receivable		31,231			(1,871	)
Inventories		10,014			(44,330	)
Prepaid expenses and other assets		(13,433	)		(8,211	)
Accounts payable and other accrued expenses		24,878			38,447
Deferred tax liabilities, net		(4,528	)		3,778
Other long-term liabilities		14,800			(5,542	)
Net cash provided by operating activities		153,192			89,236
Cash flows from investing activities:
Proceeds from the disposal of assets		4,261			6,514
Additions to property, plant and equipment		(21,186	)		(20,456	)
Net cash used by investing activities		(16,925	)		(13,942	)
Cash flows from financing activities:
Payments of long-term debt		(800	)		(800	)
Proceeds from the issuance of common stock		-			4,230
Payments of cash dividends		(23,649	)		(20,681	)
Proceeds from the issuance of treasury stock		7,445			7,478
Payments for the purchase of treasury stock		(52,022	)		(76,753	)
Net cash used by financing activities		(69,026	)		(86,526	)
Net increase (decrease) in cash and cash equivalents		67,241			(11,232	)
Cash and cash equivalents at beginning of period		51,248			71,668
Cash and cash equivalents at end of period	$	118,489		$	60,436
Supplemental disclosure:
Cash payments for income taxes, net	$	32,815		$	26,007
Cash payments for interest expense	$	9,232		$	13,177

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

(1) Inventories are summarized as follows:

	September 30,		December 31,
	2005		2004
Finished products	$	270,442	$	268,170
Work-in-process		45,884		49,362
Raw materials		118,488		127,296
	$	434,814	$	444,828

(2) Weighted average shares used in the computation of basic and diluted net earnings per common share are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005		2004
Weighted average shares used
for basic net earnings per
common share		51,616,863		53,977,708		52,498,436		55,156,403
Effect of dilutive securities:
Stock options		91,066		361,312		155,365		627,249
Weighted average shares used
for diluted net earnings
per common share		51,707,929		54,339,020		52,653,801		55,783,652

(3) Comprehensive income (expense) is as follows:

	Nine Months			Nine Months
	Ended			Ended
	September 30,			September 30,
	2005			2004
Net earnings	$	44,294		$	69,234
Other comprehensive income (expense), net of tax:
Financial instruments accounted
for as hedges		1,834			5,370
Foreign currency translation		(166	)		(344	)
Other comprehensive income (expense)		1,668			5,026
	$	45,962		$	74,260

The components of accumulated other comprehensive income (expense), each presented net of tax benefit, are as follows:

	September 30,			December 31,
	2005			2004
Market value of financial instruments
accounted for as hedges	$	5,842		$	4,008
Minimum pension liability		(34,092	)		(34,092	)
Foreign currency translation		(1,158	)		(992	)
	$	(29,408	)	$	(31,076	)

(4) The Company accounts for stock-based compensation using the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25. Had compensation cost for the Company's stock-based compensation plan been determined consistent with SFAS No. 123, net earnings and earnings per common share would have been as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Net earnings - as reported	$	9,919		$	19,423		$	44,294		$	69,234
Deduct: Stock-based employee
compensation expense determined
under fair value based method, net of
income tax benefits		(1,135	)		(1,220	)		(3,355	)		(3,660	)
Net earnings - pro forma	$	8,784		$	18,203		$	40,939		$	65,574
Earnings per share - basic:
As reported	$	0.19		$	0.36		$	0.84		$	1.26
Pro forma	$	0.17		$	0.34		$	0.78		$	1.19
Earnings per share - diluted:
As reported	$	0.19		$	0.36		$	0.84		$	1.24
Pro forma	$	0.17		$	0.34		$	0.78		$	1.18

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment. This statement is a revision of SFAS No. 123, and supersedes APB Opinion No. 25. SFAS No. 123 (revised 2004) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. The statement is effective as of the beginning of the first interim or annual reporting period that begins after December 15, 2005. Although management has not yet determined the final impact that SFAS No. 123 (revised 2004) will have on the Company's financial position and results of operations, it is not anticipated that the impact will be materially different than the pro forma disclosure above.

(5) The components of net periodic pension cost for Company-sponsored defined benefit plans are as follows:

	Nine Months			Nine Months
	Ended			Ended
	September 30,			September 30,
	2005			2004
Service cost	$	10,200		$	10,087
Interest cost		19,275			18,458
Expected return on plan assets		(19,500	)		(21,260	)
Net amortization and deferral		4,727			2,759
	$	14,702		$	10,044

On October 26, 2005 the Furniture Brands Retirement Plan was amended. Effective December 31, 2005 no additional benefits will accrue under the plan, except for transitional benefits for those participants who have reached the age of 50 and earned 10 or more years of service as of December 31, 2005. Effective January 1, 2006 the Company will provide retirement benefits to substantially all employees through matching contributions to the Company’s 401K plan.

(6) The Company has provided guarantees related to store leases for certain independent dealers opening Company-branded stores (e.g., Thomasville Home Furnishings Stores). The guarantees range from one to fifteen years and generally require the Company to make lease payments in the event of default by the dealer. In the event of default, the Company has the right to assign or assume the lease. The total future lease payments guaranteed at September 30, 2005 were $93,148. The Company believes the risk of significant loss from these lease guarantees is remote.

(7) The Company recognizes sales when finished goods are shipped, with appropriate provisions for returns and uncollectible accounts. Shipping revenues have historically been netted against related expenses. We have reclassified these revenues to net sales, increasing net sales and cost of sales by $17,010 and $53,446 in the three months and nine months ended September 30, 2004, respectively. This reclassification had no impact on earnings.

Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition

RESULTS OF OPERATIONS

Furniture Brands International, Inc. (referred to herein as the "Company") is one of the largest home (residential) furniture manufacturers in the United States. The Company markets its products through four primary operating subsidiaries: Broyhill Furniture Industries, Inc.; Lane Furniture Industries, Inc.; Thomasville Furniture Industries, Inc., and HDM Furniture Industries, Inc. (which includes the operations of Henredon, Drexel Heritage and Maitland-Smith).

Comparison of Three Months and Nine Months Ended September 30, 2005 and 2004

Selected financial information for the three months and nine months ended September 30, 2005 and September 30, 2004 is presented below:

(Dollars in millions except per share data)

	Three Months Ended
	September 30, 2005					September 30, 2004
			% of					% of
	Dollars		Net Sales			Dollars		Net Sales
Net sales	$	557.9		100.0	%	$	574.8		100.0	%
Cost of sales		427.0		76.5			429.2		74.7
Gross profit		130.9		23.5			145.6		25.3
Selling, general and administrative expenses		114.1		20.5			112.7		19.6
Earnings from operations		16.8		3.0			32.9		5.7
Interest expense		3.1		0.6			3.4		0.6
Other income, net		0.9		0.2			0.6		0.1
Earnings before income tax expense		14.6		2.6			30.1		5.2
Income tax expense		4.7		0.8			10.7		1.8
Net earnings	$	9.9		1.8		$	19.4		3.4
Net earnings per common share - diluted	$	0.19		-		$	0.36		-

	Nine Months Ended
	September 30, 2005				September 30, 2004
			% of				% of
		Dollars	Net Sales			Dollars	Net Sales
Net sales	$	1,793.2	100.0	%	$	1,845.5	100.0	%
Cost of sales		1,353.8	75.5			1,370.1	74.2
Gross profit		439.4	24.5			475.4	25.8
Selling, general and administrative expenses		367.5	20.5			357.0	19.4
Earnings from operations		71.9	4.0			118.4	6.4
Interest expense		9.0	0.5			12.3	0.7
Other income, net		3.4	0.2			1.7	0.1
Earnings before income tax expense		66.3	3.7			107.8	5.8
Income tax expense		22.0	1.2			38.6	2.0
Net earnings	$	44.3	2.5		$	69.2	3.8
Net earnings per common share - diluted	$	0.84	-		$	1.24	-

Net sales for the three months ended September 30, 2005 were $557.9 million, compared to $574.8 million in the three months ended September 30, 2004, a decrease of $16.9 million or 2.9%. For the nine months ended September 30, 2005, net sales decreased $52.3 million or 2.8%, to $1,793.2 million from $1,845.5 million for the nine months ended September 30, 2004. The Company continues to see a difference in revenues across its Brands with relatively strong business at higher-end Brands more than offset by continuing weakness at the middle-price Brands.

Cost of sales for the three months ended September 30, 2005 was $427.0 million compared to $429.2 million in the three months ended September 30, 2004. Cost of sales as a percentage of net sales increased from 74.7% in the three months ended September 30, 2004 to 76.5% in the three months ended September 30, 2005. Cost of sales for the nine months ended September 30, 2005 was $1,353.8 million compared to $1,370.1 million in the nine months ended September 30, 2004. Cost of sales as a percentage of net sales increased from 74.2% in the nine months ended September 30, 2004 to 75.5% in the nine months ended September 30, 2005. Restructuring, asset impairment and severance charges included in cost of sales for the three months and nine months ended September 30, 2005 were $2.5 million and $5.8 million, respectively, and for the three months and nine months ended September 30, 2004 were $0.1 million and $5.0 million, respectively. The increase in cost of sales for the three months ended September 30, 2005 was due to increases in raw material prices, inefficiencies at facilities closed during the period and the write-down of discontinued raw material inventory for items to be imported. In addition to these increases, the nine months ended September 30, 2005 included increases in energy and freight costs, warehouse expenses and tariffs.

Selling, general and administrative expenses for the three months ended September 30, 2005 were $114.1 million compared to $112.7 million in the three months ended September 30, 2004. As a percentage of net sales, these expenses were 20.5% and 19.6% for the three months ended September 30, 2005 and September 30, 2004, respectively. Selling, general and administrative expenses for the nine months ended September 30, 2005 and September 30, 2004 were $367.5 million and $357.0 million, respectively. As a percentage of net sales, these expenses were 20.5% and 19.4% for the nine months ended September 30, 2005 and September 30, 2004, respectively. Restructuring, asset impairment and severance charges for the three months and nine months ended September 30, 2005 were $1.2 million and $14.1 million, respectively, and for the three months and nine months ended September 30, 2004 were $1.5 million and $1.9 million, respectively. Also included in the prior year nine months was a charge of $8.3 million related to the Breuner’s bankruptcy. Increases in selling, general and administrative expenses were primarily the result of higher pension expense and operating expenses from the Company owned retail stores (15 stores at September 30, 2005 compared to 6 stores at September 30, 2004.

Interest expense totaled $3.1 million and $9.0 million for the three months and nine months ended September 30, 2005, respectively, compared to $3.4 million and $12.3 million in the prior comparable period. The decrease in interest expense reflects lower interest rates due to the positive impact of the interest rate swaps (entered into in May, 2004) which are used to hedge $300.0 million of the floating rate debt.

Other income, net totaled $0.9 million and $3.4 million for the three months and nine months ended September 30, 2005, respectively, compared to $0.5 million and $1.7 million for the prior year comparable periods. For the three months and nine months ended September 30, 2005 other income consisted of interest on short-term investments and notes receivable of $0.7 million and $1.5 million, respectively. Other miscellaneous income and expense for the nine months ended September 30, 2005 included proceeds received from an anti-trust lawsuit settlement of $0.6 million.

The effective income tax rates were 31.9% and 35.4% for the three months ended September 30, 2005 and September 30, 2004, respectively, and 33.2% and 35.8% for the nine months ended September 30, 2005 and September 30, 2004, respectively. The effective tax rates for the three months and nine months ended September 30, 2005 were favorably impacted by lower provisions for federal and state income taxes and the domestic manufacturing deductions included in the American Jobs Creation Act of 2004.

Net earnings per common share for basic and diluted were $0.19 and $0.19 for the three months ended September 30, 2005, respectively, compared with $0.36 and $0.36, for the same period last year, respectively. For the nine months ended September 30, 2005 and September 30, 2004, net earnings per common share for basic and diluted were $0.84 and $0.84, respectively, and $1.26 and $1.24, respectively. Average common and common equivalent shares outstanding used in the calculation of net earnings per common share on a basic and diluted basis were 51,616,863 and 51,707,929, respectively, for the three months ended September 30, 2005 and 53,977,708 and 54,339,020, respectively, for the three months

ended September 30, 2004. For the nine months ended September 30, 2005 and September 30, 2004, average common and common equivalent shares outstanding used in the calculation of net earnings per common share on a basic and diluted basis were 52,498,436 and 52,653,801, respectively, and 55,156,403 and 55,783,652, respectively. The reduction in average shares in both periods was due to the impact of stock repurchases during 2004 and 2005 and the impact of stock options using the treasury method of calculation.

FINANCIAL CONDITION

Working Capital

Cash and cash equivalents at September 30, 2005 amounted to $118.5 million, compared with $51.2 million at December 31, 2004. During the nine months ended September 30, 2005, net cash provided by operating activities totaled $153.2 million, net cash used by investing activities totaled $16.9 million and net cash used by financing activities totaled $69.0 million. The increase in net cash provided by operating activities as compared with the nine months ended September 30, 2004 is primarily the result of working capital decreases.

Working capital was $718.6 million at September 30, 2005, compared with $711.1 million at December 31, 2004. The current ratio was 4.3-to-1 at September 30, 2005, compared to 4.6-to-1 at December 31, 2004.

Financing Arrangements

As of September 30, 2005, long-term debt consisted of the following in millions:

Revolving credit facility (unsecured)	$	300.0
Other		1.6
	$	301.6

To meet short-term capital and other financial requirements, the Company maintains a $550.0 million revolving credit facility with a group of financial institutions. The revolving credit facility allows for the issuance of letters of credit and cash borrowings. Letter of credit outstandings are limited to no more than $150.0 million, with cash borrowings limited only by the facility's maximum availability less letters of credit outstanding. On September 30, 2005, there were $300.0 million in cash borrowings and $15.6 million in letters of credit outstanding under the revolving credit facility, leaving an excess of $234.4 million available for future liquidity needs.

The facility requires the Company to meet certain financial covenants including a minimum consolidated net worth and maximum leverage ratio. As of September 30, 2005, the Company was in compliance with all financial covenants.

Cash borrowings under the revolving credit facility bear interest at a base rate or at an adjusted Eurodollar rate plus an applicable margin which varies, depending upon the type of loan the Company executes. The applicable margin over the base rate and Eurodollar rate is subject to adjustment based upon achieving certain credit ratings. At September 30, 2005, loans outstanding under the revolving credit facility consisted of $300.0 million based on the adjusted Eurodollar rate, which in conjunction with the interest rate swaps (used to hedge $300.0 million of the floating rate debt), have a weighted average interest rate of 3.48%.

The Company believes that cash generated from operations, together with its revolving credit facility, will be adequate to meet liquidity requirements for the foreseeable future.

Recently Issued Statements of Financial Accounting Standards

In March 2005, The Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (FIN 47). FIN 47 provides guidance relating to the identification and recognition of legal obligations to perform an asset retirement activity. The interpretation requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. This interpretation is effective for the Company no later than December 31, 2005. We are currently evaluating the impact, if any, that the adoption of FIN 47 will have on the Company's financial position and results of operations.

In December 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based Payment. This statement is a revision of SFAS No. 123, Accounting for Stock-Based Compensation and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123 (revised 2004) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for good or services. The statement is effective as of the beginning of the first interim or annual reporting period that begins after December 15, 2005. Although management has not yet determined the final impact that SFAS No. 123 (revised 2004) will have on the Company's financial position and results of operations, it is not anticipated that the impact will be materially different than the effect disclosed in Note 4 in the Notes to Consolidated Financial Statements.

In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of Accounting Research Bulletin (ARB) No. 43, Chapter 4. This statement clarified the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) by requiring that they be recognized as current-period charges. In addition, this statement requires that allocation of fixed production overhead to inventory be based on the normal capacity of the production facilities. The Company does not expect the adoption of SFAS No. 151 to have a material effect on its financial position or results of operations.

OUTLOOK

Business conditions in the middle-price points remain challenging, and the Company sees nothing in the marketplace to indicate improvement in this segment in the near term. In addition, the Company is managing around unprecedented raw material price increases, particularly with reference to polyurethane foam, a situation that will likely continue through the fourth quarter. With respect to the fourth quarter, we expect net sales to be off low single digits versus the year ago period and net earnings to be in the 15 to 19 cent range, which includes the effect of 8 cents in restructuring, asset impairment and severance charges.

FORWARD-LOOKING STATEMENTS

The Company herein has made 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 sales, earnings per share, profit margins, and cash flows, the effects of certain manufacturing realignments and other business strategies, 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 include, but are not limited to:

changes in economic conditions; loss of market share due to competition; failure to anticipate or respond to changes in consumer tastes and fashion trends; failure to achieve projected sales; business failures of large customers; distribution and manufacturing realignments and cost savings programs; increased reliance on offshore (import) sourcing of various products; fluctuations in the cost, availability and quality of raw materials; product liability uncertainty; impairment of goodwill and other intangible assets. Other risk factors may be listed from time to time in the Company's future public releases and SEC reports. Please refer to the Company's Annual Report on Form 10-K for a more detailed explanation of the Company's risk factors.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to market risk from changes in interest rates. The Company's exposure to interest rate risk consists of its floating rate revolving credit facility. This risk is managed using interest rate swaps to fix a portion of the Company's floating rate long-term debt. Currently, interest rate swaps fix the entire outstanding balance on the revolving credit facility; therefore, an increase in interest rates would have no impact on the Company's net earnings.

Item 4. Controls and Procedures

(a) The Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective based on their evaluation of these controls and procedures as of the end of the period covered by this report. Notwithstanding the foregoing, there can be no assurance that the Company’s disclosure controls and procedures will detect or uncover all failures of persons within the Company and its consolidated subsidiaries to disclose material information otherwise required to be set forth in the Company’s report.

(b) No change in the Company's internal control over financial reporting has occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

ISSUER PURCHASES OF EQUITY SECURITIES

					Total Number
					of Shares		Approximate Dollar
					Purchased as		Value of Shares
	Total		Average		Part of Publicly		that May Yet
	Number		Price		Announced		Be Purchased
	Of Shares		Paid		Plans		Under the Plans
Period		Purchased		per Share		or Programs		or Programs
July 1 - July 31		229,676		21.80		229,676	$	100,000,000
August 1 - August 31		919,090		19.28		919,090		82,276,717
September 1 -September 30		245,000		17.79		245,000		77,917,698
Total		1,393,766	$	19.44		1,393,766

On August 2, 2004, the Company announced that its Board of Directors authorized the repurchase of $50 million of its Common Stock over a period of 12 months. This authorization expired on July 29, 2005, at which time 1,413,667 shares had been purchased at a total cost of $29,940,031.

On July 28, 2005 the Company’s Board of Directors authorized the repurchase of up to $100 million of its Common Stock over the next 12 month period.

Item 6. Exhibits

31 Certifications of W. G. Holliman, Chief Executive Officer of the Company and Denise L. Ramos, Chief Financial Officer of the Company, Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32 Certifications of W. G. Holliman, Chief Executive Officer of the Company and Denise L. Ramos, Chief Financial Officer of the Company, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Furniture Brands International, Inc.

(Registrant)

By /s/ Steven W. Alstadt

Steven W. Alstadt

Controller and

Chief Accounting Officer

Date: November 8, 2005

EXHIBIT INDEX

Exhibit No. Description

31 Certifications of W. G. Holliman, Chief Executive Officer of the Company and Denise L. Ramos, Chief Financial Officer of the Company, Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32 Certifications of W. G. Holliman, Chief Executive Officer of the Company and Denise L. Ramos, Chief Financial Officer of the Company, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.