Fbi Wind Down (FBN) 10-Q 2009 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

OR

o 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 001-00091

Furniture Brands International, Inc.

(Exact name of registrant as specified in its charter)

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

1 North Brentwood Blvd., St. Louis, Missouri
(Address of principal executive offices) 63105
(Zip Code)

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

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.

þ Yeso No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

o Yeso No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerþ  Accelerated filero  Non-accelerated filer  o
(Do not check if a smaller reporting company) Smaller reporting companyo 

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).

o Yesþ No

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

48,709,525 shares as of July 31, 2009

Furniture Brands International, Inc.
Table of Contents

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Financial Statements:
Consolidated Balance Sheets:		3
June 30, 2009
December 31, 2008
Consolidated Statements of Operations:		4
Three Months Ended June 30, 2009
Three Months Ended June 30, 2008
Six Months Ended June 30, 2009
Six Months Ended June 30, 2008
Consolidated Statements of Cash Flows:		6
Six Months Ended June 30, 2009
Six Months Ended June 30, 2008
Notes to Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3. Quantitative and Qualitative Disclosures about Market Risk		26
Item 4. Controls and Procedures		26
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		27
Item 1A. Risk Factors		27
Item 4. Submission of Matters to a Vote of Security Holders		28
Item 6. Exhibits		29
EX-10.1
EX-10.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Trademarks and trade names referred to in this filing include Broyhill, Lane, Thomasville, Drexel Heritage, Henredon, Hickory Chair, Pearson, Laneventure, and Maitland-Smith, among others.

2

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share information)
(unaudited)

	June 30,			December 31,
	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	77,263		$	106,580
Receivables, less allowances of $26,853 ($34,372 at December 31, 2008)		136,849			178,590
Income tax refund receivable		2,282			38,090
Inventories		306,844			350,026
Prepaid expenses and other current assets		13,452			12,592
Total current assets		536,690			685,878
Property, plant, and equipment, net		144,680			150,864
Trade names		127,300			127,300
Other assets		34,827			35,476
Total assets	$	843,497		$	999,518
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	19,000		$	30,000
Accounts payable		58,725			85,206
Accrued employee compensation		16,962			49,082
Other accrued expenses		59,477			63,214
Total current liabilities		154,164			227,502
Long-term debt		110,000			160,000
Deferred income taxes		28,542			27,917
Pension liability		134,780			137,199
Other long-term liabilities		68,696			80,406
Shareholders’ equity:
Preferred stock, 10,000,000 shares authorized, no par value — none issued		—			—
Common stock, 200,000,000 shares authorized, $1.00 stated value — 56,482,541 shares issued at June 30, 2009 and December 31, 2008		56,483			56,483
Paid-in capital		222,700			224,419
Retained earnings		356,346			376,515
Accumulated other comprehensive loss		(114,574	)		(116,988	)
Treasury stock at cost, 7,773,016 shares at June 30, 2009 and 7,704,764 shares at December 31, 2008		(173,640	)		(173,935	)
Total shareholders’ equity		347,315			366,494
Total liabilities and shareholders’ equity	$	843,497		$	999,518

See accompanying notes to consolidated financial statements.

3

FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share information)
(unaudited)

	Three Months Ended June 30,
	2009			2008
Net sales	$	288,263		$	449,870
Cost of sales		226,635			349,520
Gross profit		61,628			100,350
Selling, general, and administrative expenses		76,015			131,979
Operating loss		(14,387	)		(31,629	)
Interest expense		1,512			2,802
Other income, net		761			1,081
Loss from continuing operations before income tax expense (benefit)		(15,138	)		(33,350	)
Income tax expense (benefit)		855			(9,354	)
Net loss from continuing operations		(15,993	)		(23,996	)
Net earnings from discontinued operations		—			52
Net loss	$	(15,993	)	$	(23,944	)
Earnings (loss) per common share — basic and diluted:
Loss from continuing operations	$	(0.33	)	$	(0.49	)
Earnings from discontinued operations	$	—		$	—
Net loss	$	(0.33	)	$	(0.49	)
Weighted average shares of common stock outstanding — basic and diluted		48,712			48,806

See accompanying notes to consolidated financial statements.

4

FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share information)
(unaudited)

	Six Months Ended June 30,
	2009			2008
Net sales	$	645,134		$	927,070
Cost of sales		503,165			715,701
Gross profit		141,969			211,369
Selling, general, and administrative expenses		159,229			233,960
Operating loss		(17,260	)		(22,591	)
Interest expense		3,300			6,945
Other income, net		1,687			3,317
Loss from continuing operations before income tax expense (benefit)		(18,873	)		(26,219	)
Income tax expense (benefit)		1,296			(5,971	)
Net loss from continuing operations		(20,169	)		(20,248	)
Net earnings from discontinued operations		—			29,920
Net earnings (loss)	$	(20,169	)	$	9,672
Earnings (loss) per common share — basic and diluted:
Loss from continuing operations	$	(0.41	)	$	(0.42	)
Earnings from discontinued operations	$	—		$	0.61
Net earnings (loss)	$	(0.41	)	$	0.20
Weighted average shares of common stock outstanding — basic and diluted		48,738			48,683

See accompanying notes to consolidated financial statements.

5

FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

	Six Months Ended June 30,
	2009			2008
Cash flows from operating activities:
Net earnings (loss)	$	(20,169	)	$	9,672
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation		10,834			13,022
Compensation expense (credit) related to stock option grants and restricted stock awards		(1,414	)		2,024
Provision (benefit) for deferred income taxes		717			(6,134	)
Gain on sale of discontinued operations		—			(48,109	)
Other, net		(1,639	)		(2,349	)
Changes in operating assets and liabilities:
Accounts receivable		40,947			42,038
Income tax refund receivable		35,808			4,173
Inventories		45,069			17,843
Prepaid expenses and other assets		(686	)		316
Accounts payable and other accrued expenses		(62,771	)		10,325
Other long-term liabilities		(11,159	)		(3,206	)
Net cash provided by operating activities		35,537			39,615
Cash flows from investing activities:
Acquisition of stores, net of cash acquired		—			(9,505	)
Proceeds from the sale of business, net of cash sold		—			73,359
Proceeds from the disposal of assets		2,159			3,297
Additions to property, plant, and equipment		(6,003	)		(9,025	)
Net cash provided (used) by investing activities		(3,844	)		58,126
Cash flows from financing activities:
Payments of long-term debt		(61,000	)		(100,800	)
Restricted cash used for payment of long-term debt		—			20,000
Payments of cash dividends		—			(3,892	)
Other		(10	)		(8	)
Net cash used by financing activities		(61,010	)		(84,700	)
Net increase (decrease) in cash and cash equivalents		(29,317	)		13,041
Cash and cash equivalents at beginning of period		106,580			118,764
Cash and cash equivalents at end of period	$	77,263		$	131,805
Supplemental disclosure:
Cash payments (refunds) for income taxes, net	$	(35,224	)	$	7,269
Cash payments for interest expense	$	3,686		$	8,539

See accompanying notes to consolidated financial statements.

6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except per share information)
(unaudited)

(1) BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Furniture Brands International, Inc. and its subsidiaries (the “Company”) have been prepared in accordance with accounting principals generally accepted in the United States (“U.S. GAAP”) and such principals are applied on a basis consistent with those reflected in our 2008 Annual Report on Form-10K, filed with the Securities and Exchange Commission. The year end balance sheet data was derived from audited financial statements. The accompanying unaudited consolidated financial statements include all adjustments (consisting of normal recurring adjustments and accruals) which management considers necessary for a fair presentation of the results of the period. These consolidated financial statements do not include all information and footnotes normally included in financial statements prepared in accordance with U.S. GAAP. These consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2008. The consolidated financial statements consist of the accounts of our company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In preparing these consolidated financial statements as of June 30, 2009, we performed an evaluation of subsequent events through the filing of this Form 10-Q in accordance with Statement of Financial Accounting Standards No. 165,Subsequent Events. The results for the six months ended June 30, 2009 are not necessarily indicative of the results which will occur for the full fiscal year ending December 31, 2009.

The preparation of financial statements in accordance with U.S. GAAP requires us to make estimates, judgments, and assumptions, which we believe to be reasonable, based on the information available. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

In the first quarter of 2008, we sold Hickory Business Furniture, a wholly owned subsidiary that designs and manufactures business furniture. As a result, this business unit has been reflected as a discontinued operation in all periods presented, pursuant to the provisions of Financial Accounting Standards No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets.

(2) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 (“SFAS 157”),Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value in U. S. GAAP, and expands the disclosure requirements regarding fair value measurements. The rule does not introduce new requirements mandating the use of fair value. SFAS 157 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The definition is based on an exit price rather than an entry price, regardless of whether the entity plans to hold or sell the asset. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The required transition date for SFAS 157 was delayed until fiscal years beginning after November 15, 2008 for non-financial assets and liabilities, except for those that are recognized or disclosed at fair value in the financial statements on a recurring basis. The adoption on January 1, 2008 of the portion of SFAS 157 that was not delayed until fiscal years beginning after November 15, 2008 did not have a material effect on our financial position or results of operations. The adoption of the remaining provisions of SFAS 157 on January 1, 2009 did not have a material effect on our financial position or results of operations.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (Revised 2007) (“SFAS 141R”),Business Combinations. SFAS 141R requires an acquiring entity to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We adopted the provisions of SFAS 141R on January 1, 2009. The adoption of this statement did not effect our financial position or results of operations.

7

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160 (“SFAS 160”),Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51. SFAS 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The adoption of SFAS 160 on January 1, 2009 did not affect our financial position or results of operations.

In December 2008, the FASB issued FASB Staff Position No. FAS 132R-1 (“FSP FAS 132R-1”),Employers’ Disclosures about Postretirement Benefit Plan Assets. FSP FAS 132R-1 enhances the required disclosures related to postretirement benefit plan assets including disclosures concerning a company’s investment policies for benefit plan assets, categories of plan assets, fair value measurements of plan assets, and concentrations of risk within plan assets. The adoption of this statement will not effect our financial position or results of operations as it will only impact the disclosures in our annual report for the fiscal year ended December 31, 2009.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168 (“SFAS 168”),The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162. SFAS 168 will become the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. This statement is not intended to change existing U.S. GAAP.

(3) FAIR VALUE OF FINANCIAL INSTRUMENTS

We consider the carrying amounts of cash and cash equivalents, receivables, and accounts payable to approximate fair value because of the short maturity of these financial instruments.

We consider the carrying value of amounts outstanding under the asset based loan to approximate fair value because they accrue interest at rates which generally fluctuate with interest rate trends.

(4) ACQUISITIONS

During the three months ended June 30, 2008, we acquired four stores from two of our dealers for total consideration of $764. The acquisitions were asset purchases consisting mainly of inventories and fixed assets and the assumption of certain liabilities, primarily customer deposits.

During the three months ended March 31, 2008, we acquired 15 stores and a warehouse from five of our dealers for total consideration of $8,741. The acquisitions were asset purchases consisting mainly of inventories and fixed assets and the assumption of certain liabilities, primarily customer deposits.

The Consolidated Statement of Operations includes the results of operations of the acquired stores from the date of their acquisition. The pro forma impact of the acquisitions on prior periods is not presented as the impact is not material to operations.

(5) RESTRUCTURING AND ASSET IMPAIRMENT CHARGES

We have been executing plans to reduce our domestic manufacturing capacity. Qualifying assets related to restructuring are included in assets held for sale in Other Assets in the Consolidated Balance Sheets until sold. Total assets held for sale were $10,483 at June 30, 2009 and $10,017 at December 31, 2008. Included in the restructuring charges for the three and six months ended June 30, 2009 are expenses associated with our 26 closed retail store locations and severance costs which are primarily associated with our manufacturing operations.

8

Restructuring and asset impairment charges were as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2009			2008		2009			2008
Restructuring charges (benefits):
Termination benefits	$	1,912		$	74	$	2,330		$	74
Closed store occupancy and lease cost		610			11,207		2,005			13,420
Loss (gain) on sale of assets		(175	)		18		(175	)		(1,225	)
	$	2,347		$	11,299	$	4,160		$	12,269
Statement of Operations classification:
Cost of sales	$	1,788		$	92	$	2,206		$	92
Selling, general and administrative expenses		559			11,207		1,954			12,177
	$	2,347		$	11,299	$	4,160		$	12,269

Asset impairment charges were recorded to reduce the carrying value of all idle facilities and related machinery and equipment to their net realizable value. The determination of the impairment charges were based primarily upon (i) consultations with real estate brokers, (ii) proceeds from recent sales of company facilities, and (iii) the market prices being obtained for similar long-lived assets.

Closed store occupancy and lease costs include occupancy costs associated with closed retail locations, early contract termination settlements for retail leases during the period, and closed store lease liabilities representing the present value of the remaining lease rentals reduced by the current market rate for sublease rentals of similar properties. This liability is reviewed quarterly and adjusted as necessary to reflect changes in estimated sublease rentals.

Activity in the accrual for closed store lease liabilities during the three months ended June 30, 2009 was as follows:

Accrual for closed store lease liabilities at beginning of period	$	26,669
Cash payments		(3,648	)
Charges (credit) to expense		(1,502	)
Accrual for closed store lease liabilities at end of period	$	21,519

In the second quarter of 2009, we approved a plan to open two previously closed company-owned retail stores during 2009. As a result of this decision, the closed store lease liability of $1,879 previously recorded for these company-owned stores was reversed in the second quarter.

At June 30, 2009, $5,749 of the accrual for closed store lease liability is classified as current accrued expenses, with the remaining balance in other long-term liabilities.

Remaining minimum lease payments under operating leases for closed stores as of June 30, 2009 are as follows:

	Minimum Lease
	Payments —
Year	Closed Stores
2009	$	5,129
2010		7,403
2011		6,904
2012		7,030
2013		6,921
2014		6,641
Thereafter		5,110
	$	45,138

Activity in the accrual for termination benefits during the three months ended June 30, 2009 was as follows:

Accrual for termination benefits at beginning of period	$	2,608
Cash payments		(3,057	)
Charges to expense		1,912
Accrual for termination benefits at end of period	$	1,463

The accrual for termination benefits at June 30, 2009 is classified as current accrued expenses.

(6) INVENTORIES

Inventories are summarized as follows:

	June 30,		December 31,
	2009		2008
Raw materials	$	86,181	$	89,713
Work-in-process		18,783		21,405
Finished products		201,880		238,908
	$	306,844	$	350,026

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(7) PROPERTY, PLANT AND EQUIPMENT

Major classes of property, plant and equipment consist of the following:

	June 30,		December 31,
	2009		2008
Land	$	15,778	$	16,027
Buildings and improvements		197,329		198,836
Machinery and equipment		270,393		270,597
		483,500		485,460
Less: accumulated depreciation		338,820		334,596
	$	144,680	$	150,864

Depreciation expense was $10,834 and $13,022 for the six months ended June 30, 2009 and 2008, respectively.

(8) LONG-TERM DEBT

Long-term debt consists of the following:

	June 30,		December 31,
	2009		2008
Asset-based loan	$	129,000	$	190,000
Less: current maturities		19,000		30,000
Long-term debt	$	110,000	$	160,000

On August 9, 2007 we refinanced our revolving credit facility with a group of financial institutions. The facility is a five-year asset-based loan (“ABL”) with commitments to lend up to $450,000. The facility is secured by all of our accounts receivable, inventory and cash and is guaranteed by all of our domestic subsidiaries.

The ABL provides for the issuance of letters of credit and cash borrowings. The issuance of letters of credit and cash borrowings are limited by the level of a borrowing base consisting of eligible accounts receivable and inventory. As of June 30, 2009 there were $129,000 of cash borrowings and $20,494 in letters of credit outstanding.

The excess of the borrowing base over the current level of letters of credit and cash borrowings outstanding represents the additional borrowing availability under the ABL. Certain covenants and restrictions, including cash dominion, weekly borrowing base reporting, and a fixed charge coverage ratio, would become effective if excess availability fell below various thresholds. If we fall below $75,000 of availability, we are subject to cash dominion and weekly borrowing base reporting. If we fall below $62,500 of availability, we are also subject to the fixed charge coverage ratio, which we currently do not meet. As of June 30, 2009, excess availability was $75,566. Therefore, we have $566 of availability without being subject to the cash dominion and weekly reporting covenants of the agreement and $13,066 of availability before we would be subject to the fixed charge coverage ratio.

We manage our excess availability to remain above the $75,000 threshold, as we choose not to be subject to the cash dominion and weekly reporting covenants. We do not expect to be below the threshold in 2009. In addition to our borrowing capacity described above, we had $77,263 of cash and cash equivalents at June 30, 2009. On July 27, 2009, we repaid $19,000 of our long-term debt, which we have classified as current in our consolidated balance sheet.

The borrowing base is reported on the 25th day of each month based on our financial position for the previous month end. Our borrowing base calculations are subject to periodic examinations by the financial institutions which can result in adjustments to the borrowing base and our availability under the ABL. These examinations have not resulted in significant adjustments to our borrowing base or availability in the past and are not expected to result in material adjustments in the future.

10

Cash borrowings under the ABL will be at either (i) a base rate (the greater of the prime rate or the Federal Funds Effective Rate plus 1/2%) or (ii) an adjusted Eurodollar rate plus an applicable margin, depending upon the type of loan selected. The applicable margin over the adjusted Eurodollar rate is 1.50% as of June 30, 2009 and will fluctuate with excess availability. As of June 30, 2009, loans outstanding under the ABL consisted of $110,000 based on the adjusted Eurodollar rate at an interest rate of 2.10% and $19,000 based on the adjusted prime rate at an interest rate of 3.25%. The weighted average interest rate for all loans outstanding as of June 30, 2009 was 2.27%.

Under the terms of the ABL, we are required to     comply with certain operating covenants and provide certain representations to the financial institutions, including a representation after each annual report is filed with the Securities and Exchange Commission that our pension underfunded status does not exceed $50,000 for any plan. After the filing of our Form 10-K for the year ended December 31, 2008, we would not have been in compliance with this representation. However, we obtained a waiver to this required representation until the later of February 28, 2010 or such date, not to exceed January 1, 2011, that the pension relief, under the Worker, Retiree, and Employer Recovery Act of 2008, signed into law on December 23, 2008, ceases to be applicable to our plan. As consideration for the waiver, we agreed to the modification of certain administrative clauses in the ABL agreement, and as a result we agreed to 1) submit condensed mid-month borrowing base information and 2) increase the frequency, from quarterly to monthly, at which we submit certain financial information to the financial institutions.

(9) LIQUIDITY

The primary items impacting our liquidity in the future are cash from operations, capital expenditures, acquisition of stores, sale of surplus assets, borrowings and payments under our ABL, pension funding requirements, and, in 2009, the receipt of income tax refunds.

At June 30, 2009, we had $77,263 of cash and cash equivalents, $129,000 of debt outstanding, and excess availability to borrow up to an additional $13,066 subject to certain covenants as described in Note 8. Long-Term Debt. Should we not comply with certain of the provisions of our ABL agreement, the lenders can call the debt, which could have a significantly adverse impact to our liquidity and our business. While we expect to comply with the provisions of the agreement throughout 2009, further deterioration in the economy and our results could cause us to not be in compliance with our ABL agreement. While we would attempt to obtain waivers for noncompliance, we may not be able to obtain waivers, which could have a significantly adverse impact to our liquidity and our business.

In light of the recent deterioration of the global economy and uncertainty about these conditions in the foreseeable future, we are focused on effective cash management, controlling costs, and preserving cash related to capital expenditures and acquisition of stores. For example, we review all capital projects and are committed to execute only on those projects that are either necessary for business operations or have an adequate expected rate of return. Also, we will acquire stores only if we are required as the prime tenant or guarantor on the lease or if we expect an adequate return on our investment. However, if we do not have sufficient cash reserves, cash flow from our operations, or our borrowing capacity under our ABL is insufficient, we may need to raise additional funds through equity or debt financings in the future in order to meet our operating and capital needs. Nevertheless, we may not be able to secure adequate debt or equity financing on favorable terms, or at all, at the time when we need such funding. In the event that we are unable to raise additional funds, our liquidity will be adversely impacted and our business could suffer. If we are able to secure additional financing, these funds could be costly to secure and maintain, which could significantly impact our earnings and our liquidity.

(10) RETIREMENT PLANS

The components of net periodic pension expense for Company-sponsored defined benefit plans are as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Service cost	$	725		$	1,157		$	1,450		$	2,314
Interest cost		6,436			6,584			12,872			13,168
Expected return on plan assets		(6,538	)		(6,894	)		(13,076	)		(13,789	)
Net amortization and deferral		1,104			979			2,208			1,990
Net periodic pension cost	$	1,727		$	1,826		$	3,454		$	3,683

11

We amended the defined benefit plans, freezing and ceasing future benefits as of December 31, 2005. Certain transitional benefits are being provided to participants who had attained age 50 and had completed 10 years of service as of December 31, 2005.

The projected benefit obligation of our defined benefit plans exceeded the fair value of plan assets by $137,281 at December 31, 2008, the measurement date for our pension liability. In December 2008, the federal government passed legislation that provides relief through 2010 from the funding requirements under the Pension Protection Act of 2006 due to the widespread nature of disruption in financial markets. Due to this legislation, we do not expect to make cash pension contributions in 2009. However, if the relief provided by the federal government is no longer applicable to our pension plans, if there is continued downward pressure on the asset values of these plans, or if the assets fail to recover in value, it would necessitate significantly increased funding of our plans in the future.

We currently provide retirement benefits to our employees through a defined contribution plan. Our total costs of the defined benefit and defined contribution plans for the three and six months ended June 30, 2009 were $4,005 and $7,713, respectively, compared to $4,339 and $8,582 for the three and six months ended June 30, 2008, respectively.

(11) STOCK OPTIONS, RESTRICTED STOCK, AND RESTRICTED STOCK UNITS

A summary of option activity for the six months ended June 30, 2009 is presented below:

				Weighted
				Average
				Exercise
	Shares			Price
Outstanding at December 31, 2008		3,610,692		$	20.54
Granted		36,000			3.74
Exercised		—			—
Forfeited or expired		(500,150	)		22.02
Outstanding at June 30, 2009		3,146,542		$	20.12

The weighted average exercise price and the weighted average fair value per share for stock options granted during the six months ended June 30, 2009 was $3.74 and $2.42, respectively. The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model. The following weighted average assumptions were used in the valuation of these options.

Risk-free interest rate	2.1	%
Expected volatility	80.1	%
Expected life (in years)	5.0
Expected dividend yield	0.0	%

The risk-free interest rate is based upon U.S. Treasury Securities with a term similar to that of the remaining term of the grant. Expected volatility is calculated based upon the historical volatility over a period equal to the remaining term of the grant. Expected life is equal to the remaining term of the grant. The dividend yield is calculated based upon the dividend rate at June 30, 2009.

Non-vested restricted stock activity is presented below:

				Weighted
				Average
				Grant-Date
	Shares			Fair Value
Outstanding at December 31, 2008		451,501		$	12.61
Granted		83,275			3.81
Vested		(42,351	)		14.79
Forfeited		(69,453	)		13.14
Outstanding at June 30, 2009		422,972		$	10.57

12

Included in the tables above are 427,000 shares of stock options and 213,500 shares of restricted stock which have performance criteria upon which vesting is dependent. These shares were granted on March 14, 2008 and vest on December 31, 2009 if we achieve our 2009 performance measures for net earnings. As of June 30, 2009, we do not believe it is probable that these performance measures and vesting conditions will be met.

In December 2008, we awarded restricted stock units to certain executive officers. The awards are contingent on the achievement of both the Company’s share price objectives and service-based retention periods. If the trailing 10 day average of our common stock reaches $6.26 per share, then 50% of the units will vest, and the executive will be entitled to receive a cash payment of $6.26 per vested unit on the second anniversary of the grant date, or if the vesting date occurs after the second anniversary of the grant date, on the vesting date. The other fifty percent of the units will vest if the trailing 10 day average of our common stock reaches $9.39 per share, and following vesting, the executive will be entitled to receive a cash payment of $9.39 per vested unit on the third anniversary of the grant date, or if the vesting date occurs after the third anniversary of the grant date, on the vesting date. The awards expire 5 years from the grant date and are designed to reward executives for increases in share price as well as encouraging the long-term employment of the executive officers.

A summary of restricted stock unit activity for the six months ended June 30, 2009 is presented below:

	Units with			Units with
	Share Price			Share Price
	Objective of			Objective of
	$6.26			$9.39
Outstanding at December 31, 2008		1,425,710			1,425,710
Granted		—			—
Vested		—			—
Forfeited		(151,755	)		(151,755	)
Outstanding at June 30, 2009		1,273,955			1,273,955

Compensation expense of $854 was recorded in the six months ended June 30, 2009 for restricted stock unit awards due to performance during the period and increases in the estimated fair value of the awards, partially offset by forfeiture activity.

The fair value of the restricted stock unit awards is estimated each quarter using binomial pricing models. The fair value of the awards is recognized as compensation expense ratably over the derived service periods. The derived service periods are 2.6 and 3.1 years for the awards with $6.26 and $9.39 share price objectives, respectively. The following assumptions were used to determine the fair value of the restricted stock units as of June 30, 2009:

Risk-free interest rate	2.3	%
Expected volatility	78.67	%
Expected dividend yield	0.0	%

The risk-free interest rate is based upon U.S. Treasury Securities with a term similar to that of the remaining term of the grant. Expected volatility is calculated based upon the historical volatility over a period equal to the remaining term of the grant. The dividend yield is calculated based upon the dividend rate at June 30, 2009.

(12) COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) consists of the following:

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Net earnings (loss)	$	(15,993	)	$	(23,944	)	$	(20,169	)	$	9,672
Other comprehensive income, net of tax:
Pension liability		1,076			576			2,153			1,152
Foreign currency translation		932			(1,334	)		261			(1,593	)
Other comprehensive income (loss)		2,008			(758	)		2,414			(441	)
Total comprehensive income (loss)	$	(13,985	)		(24,702	)	$	(17,755	)	$	9,231

13

The components of accumulated other comprehensive loss, each presented net of tax, are as follows:

	June 30,			December 31,
	2009			2008
Pension liability	$	(114,617	)	$	(116,770	)
Foreign currency translation		43			(218	)
Accumulated other comprehensive loss	$	(114,574	)	$	(116,988	)

(13) EARNINGS PER SHARE

Stock options have been excluded from the computation of diluted earnings per common share because their inclusion would be antidilutive. Excluded stock options were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Stock options		3,146,542		3,764,092		3,146,542		3,764,092
Average exercise price	$	20.12	$	20.57	$	20.12	$	20.57

(14) INCOME TAXES

We file income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. With few exceptions, we are no longer subject to United States federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2004. The Internal Revenue Service (“IRS”) commenced an examination of our United States income tax return for 2005 in the first quarter of 2007 and limited scope examinations of our United States income tax returns for 2006 and 2007 in the first quarter of 2009.

As of June 30, 2009 and December 31, 2008, the total amount of unrecognized tax benefits was $10,278 and $10,297, respectively. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of June 30, 2009 and December 31, 2008, the liability for unrecognized tax benefits included accrued interest of $3,714 and $3,182 and accrued penalties of $968 and $804, respectively. We recognized interest expense of $559 and $267 and penalty expense of $163 and $206 related to unrecognized tax benefits in the statement of operations for the six months ended June 30, 2009 and 2008, respectively. The total amount of unrecognized tax benefits at June 30, 2009 that, if recognized, would affect our effective tax rate is $10,278.

At December 31, 2008, we evaluated all significant available positive and negative evidence, including the existence of losses in recent years and our forecast of future taxable income, and, as a result, determined it was more likely than not that our federal and certain state deferred tax assets, including benefits related to net operating loss carryforwards, would not be realized based on the measurement standards required under Statement of Financial Accounting Standards No. 109,Accounting for Income Taxes. The valuation allowance was increased $156,572 to $161,426 in 2008. In the three and six months ending June 30, 2009, the valuation allowance was decreased $1,716 and $999, respectively, to $160,427 due to a reduction in net deferred tax assets requiring a valuation allowance, partially offset by additional net operating losses during the periods.

The amount of the valuation allowance charged to income tax expense was $7,207 and $917 in the six months ended June 30, 2009 and 2008, respectively. At June 30, 2009, the value of the federal and state net operating loss carryforwards available for future tax benefit is $25,894 and $20,102, respectively, before the valuation allowance. The federal losses expire in the year 2028. The state losses generally start to expire in the year 2021. While we have no other limitations on the use of our net operating loss carryforwards, we are potentially subject to limitations if a change in control occurs pursuant to applicable statutory regulations.

14

(15) CONTINGENT LIABILITIES

We are involved, from time to time, in litigation and other legal proceedings incidental to our business. Management believes that the outcome of current litigation and legal proceedings will not have a material adverse effect upon our results of operations or financial condition. However, management’s assessment of our current litigation and other legal proceedings could change in light of the discovery of facts with respect to legal actions or other proceedings pending against us not presently known to us or determinations by judges, juries or other finders of fact which are not in accordance with management’s evaluation of the probable liability or outcome of such litigation or proceedings.

We are also involved in various claims relating to environmental matters at a number of current and former plant sites. We engage or participate in remedial and other environmental compliance activities at certain of these sites. At other sites, we have been named as a potentially responsible party under federal and state environmental laws for site remediation. Management analyzes each individual site, considering the number of parties involved, the level of our potential liability or contribution relative to the other parties, the nature and magnitude of the hazardous wastes involved, the method and extent of remediation, the potential insurance coverage, the estimated legal and consulting expense with respect to each site and the time period over which any costs would likely be incurred. Based on the above analysis, management believes at the present time that any claims, penalties or costs incurred in connection with known environmental matters will not reasonably likely have a material adverse effect upon our consolidated financial position or results of operations. However, management’s assessment of our current claims could change in light of the discovery of facts with respect to environmental sites, which are not in accordance with management’s evaluation of the probable liability or outcome of such claims.

We are the prime tenant for operating leases and have subleased the premises to independent furniture dealers. In addition, we guarantee certain leases of company-brand stores operated by independent furniture dealers. These leases and guarantees have remaining terms ranging from one to twelve years and generally require us to make lease payments in the event of default by the dealer. In the event of default, we have the right to assign or assume the lease. Total future payments applicable to subleases and lease guarantees were $43,937 as of June 30, 2009.

(16) DISCONTINUED OPERATIONS

On October 16, 2007, we announced our intent to divest Hickory Business Furniture (“HBF”), a wholly-owned subsidiary that designs and manufactures business furniture. This business unit was reflected as a discontinued operation pursuant to the provisions of Statement of Financial Accounting Standards No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets

On March 29, 2008, we closed the sale of HBF for $75,000 and recorded a gain of $28,868, which is net of income tax expense of $19,247.

The following table presents a condensed statement of operations for the discontinued operation for both the quarter ended March 31, 2008 and six months ended June 30, 2008:

Net sales	$	15,348
Earnings before income tax expense	$	1,734
Net earnings	$	1,052

15

(17) SUBSEQUENT EVENTS

Effective August 3, 2009, our Board of Directors adopted a Stockholders Rights Agreement (the “Rights Agreement”) to reduce the risk of limitation of the Company’s net operating loss carryforwards and certain other tax benefits or attributes under Section 382 of the Internal Revenue Code. The Rights Agreement replaces the Company’s prior stockholders rights plan and reduces the threshold percentage of beneficial ownership of the Company’s common stock by any person or group that would trigger the rights under the Rights Agreement from 15% to 4.75% (an “Acquiring Person”), with the exception of stockholders that currently own 4.75% or more of the common stock would not be deemed to be an Acquiring Person so long as they acquired no more than an additional 0.5% of the common stock, up to a maximum of 15%. In addition, in its discretion, the Board may exempt certain transactions and certain persons whose acquisition of securities is determined by the Board not to jeopardize the Company’s net deferred tax assets and whose holdings following such acquisition will not equal or exceed 15% of the Company’s outstanding common stock.

In connection with the adoption of the Rights Agreement, the Board of Directors declared a distribution of one right (a “Right”) for each outstanding share of Common Stock, no par value, of the Company (the “Common Stock”) to the stockholders of record as of the close of business on August 13, 2009, and for each share of Common Stock issued by the Company thereafter and prior to the distribution date. Each Right entitles the holder, subject to the terms of the Rights Agreement, to purchase from the Company one one-thousandth of a share (a “Unit”) of Series B Junior Participating Preferred Stock, no par value (“Series B Preferred Stock”), at a purchase price of $20.00 per Unit, subject to adjustment (the “Purchase Price”).

In general, the Rights will become exercisable upon the earlier of (i) 10 business days following a public announcement that a person or group has become an Acquiring Person or (ii) 10 business days following the commencement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person. In the event that a person or group becomes an Acquiring Person, then each holder of a Right (other than those held by the Acquiring Person) will have the right to receive, upon exercise, shares of Common Stock having a value equal to two times the exercise price of the Right. The exercise price is the Purchase Price multiplied by the number of Units of Series B Preferred Stock issuable upon exercise of a Right prior to the events described in this paragraph.

The Rights will expire at the close of business on July 30, 2011 unless earlier redeemed or exchanged by the Company.

The Rights Agreement and Certificate of Designation of Series B Junior Participating Preferred Stock are incorporated herein by reference to our Report on Form 8-K, filed with the Securities and Exchange Commission on August 4, 2009.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Our Management’s Discussion and Analysis of Financial Condition and Results of Operation (“MD&A”) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. The various sections of this MD&A contain a number of forward-looking statements. Words such as “expects,” “goals,” “plans,” “believes,” “continues,” “may,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this and previous filings and particularly in the “Risk Factors” in Part I, Item 1A of our Form 10-K for the year ended December 31, 2008.

OVERVIEW

We are one of the nation’s leading designers, manufacturers, sourcers, 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, and Maitland-Smith.

Through these brands, we design, manufacture, source, market, and distribute (i) case goods, consisting of bedroom, dining room, and living room furniture, (ii) stationary upholstery products, consisting of sofas, loveseats, sectionals, and chairs, (iii) motion upholstered furniture, consisting of recliners and sleep sofas, (iv) occasional furniture, consisting of wood, metal and glass tables, accent pieces, home entertainment centers, and home office furniture, and (v) decorative accessories and accent pieces. Our brands are featured in nearly every price and product category in the residential furniture industry.

Each of our brands designs, manufactures, sources, and markets home furnishings, targeting specific customers in relation to style and price point.

• Broyhill has collections of mid-priced furniture, including both wood furniture and upholstered products, in a wide range of styles and product categories including bedroom, dining room, living room, occasional, youth, home office, and home entertainment.

• Lane focuses primarily on mid-priced upholstered furniture, including motion and stationary furniture with an emphasis on home entertainment and family rooms.

• Thomasville has both wood furniture and upholstered products in the mid- to upper-price ranges and also manufactures and markets promotional-priced case goods and ready-to-assemble furniture.

• Drexel Heritage markets both case goods and upholstered furniture under the brand names Heritage, Drexel, and dh, in categories ranging from mid- to premium-priced.

• Henredon specializes in both wood furniture and upholstered products in the premium-price category.

• Hickory Chair manufactures a premium-priced brand of wood and upholstered furniture, offering traditional and modern styles.

• Pearson offers contemporary and traditional styles of finely tailored upholstered furniture in the premium-price category.

• Laneventure markets a premium-priced outdoor line of wicker, rattan, bamboo, exposed aluminum, and teak furniture.

• Maitland-Smith designs and manufactures premium hand crafted, antique-inspired furniture, accessories, and lighting, utilizing a wide range of unique materials. Maitland-Smith markets under both the Maitland-Smith and LaBarge brand names.

In the first quarter of 2008, we sold Hickory Business Furniture, a wholly owned subsidiary that designs and manufactures business furniture. As a result, this business unit has been reflected as a discontinued operation in all periods presented in this Form 10-Q.

17

BUSINESS TRENDS AND STRATEGY

We continued to experience declining sales in our second fiscal quarter. We believe the continued decline in sales was primarily caused by a number of ongoing factors in the global economies that have negatively impacted consumers’ discretionary spending, including lower home values, increased foreclosure activity throughout the country, continued high levels of unemployment, and reduced access to consumer credit. Many of these factors are outside of our control, but these factors have a direct impact on our sales due to resulting weak levels of consumer confidence and reduced consumer spending.

In order to offset the impact of these economic conditions, we took several significant steps in 2008 and continue to take steps in 2009 to control costs and preserve cash. The more significant actions taken by us in 2008 include closing four domestic manufacturing facilities, reducing our domestic workforce by approximately 1,400 employees and consolidating our administrative and support functions.

Through this prolonged economic downturn, we continue to focus on controlling our costs and preserving cash as we move into the second half of 2009. These measures include reconfiguring manufacturing facilities to eliminate waste, managing product inventory levels better to reflect consumer demand, limiting our credit exposure to weak retail partners and exiting unprofitable licensing arrangements. As a result of these initiatives to counteract this environment, the following charges and costs are included in our results of operations:

• We incurred costs of $3.4 million and $5.7 million in the three months and six months ended June 30, 2009, respectively, and $7.5 million and $9.8 million in the three and six months ended June 30, 2008, respectively, related to unproductive downtime in our factories.

• We incurred charges of $1.9 million and $2.3 million in the three months and six months ended June 30, 2009, respectively, and $0.1 million in the three and six months ended June 30, 2008 associated with severance actions, which in 2009 related primarily to reductions of approximately 300 employees in our domestic manufacturing operations.

• We incurred expense of $0.6 million and $2.0 million in the three months and six months ended June 30, 2009, respectively, and $11.2 million and $13.4 million in the three months and six months ended June 30, 2008, respectively, associated with closed retail store locations, which related primarily to occupancy costs, lease termination costs, and lease liabilities.

These charges and costs contributed to our loss from continuing operations of $16.0 million and $20.2 million for the three months and six months ended June 30, 2009, respectively.

In addition to these cost savings measures, we are focusing on leveraging the power of our brands through innovative sales and marketing initiatives to increase our market share and to offset the impact of the economic downturn. These initiatives include:

• Increasing our e-commerce programs to help drive more consumer interest in our products and create more demand for our retail partners.

• Leveraging our size and scale by offering products that are differentiated from our competition through pre-launch testing that helps predict end-market acceptance, and by conducting consumer segmentation analysis to assist retailers in allocating marketing resources; and by growing a global supply chain that minimizes dealer inventory requirements.

• Improving product development and managing product inventory levels better to reflect consumer demand through consumer testing.

While we believe that these sales and marketing initiatives will positively impact our sales and particularly benefit our sales performance when economic conditions improve, we remain cautious about future sales as we expect a weak consumer retail environment to continue into the second half of 2009.

18

CONSOLIDATED RESULTS OF OPERATIONS

The following tables have been prepared to set forth certain statement of operations and other data for continuing operations for the three months and six months ended June 30, 2009 and 2008:

	Three Months Ended June 30,
	2009						2008
				% of						% of
(in millions except share and per share data)	Dollars			Net Sales			Dollars			Net Sales
Net sales	$	288.3			100.0	%	$	449.9			100.0	%
Cost of sales		226.7			78.6			349.5			77.7
Gross profit		61.6			21.4			100.4			22.3
Selling, general, and administrative expenses		76.0			26.4			132.0			29.3
Loss from operations		(14.4	)		(5.0	)		(31.6	)		(7.0	)
Interest expense		1.5			0.5			2.8			0.6
Other income, net		0.8			0.3			1.1			0.2
Loss from continuing operations before income tax expense (benefit)		(15.1	)		(5.3	)		(33.3	)		(7.4	)
Income tax expense (benefit)		0.9			0.3			(9.3	)		(2.1	)
Net loss from continuing operations	$	(16.0	)		(5.5	)%	$	(24.0	)		(5.3	)%
Net loss from continuing operations per common share — basic and diluted	$	(0.33	)				$	(0.49	)

	Six Months Ended June 30,
	2009						2008
				% of						% of
(in millions except share and per share data)	Dollars			Net Sales			Dollars			Net Sales
Net sales	$	645.1			100.0	%	$	927.1			100.0	%
Cost of sales		503.2			78.0			715.7			77.2
Gross profit		142.0			22.0			211.4			22.8
Selling, general, and administrative expenses		159.2			24.7			234.0			25.2
Loss from operations		(17.3	)		(2.7	)		(22.6	)		(2.4	)
Interest expense		3.3			0.5			6.9			0.8
Other income, net		1.7			0.3			3.3			0.4
Loss from continuing operations before income tax expense (benefit)		(18.9	)		(2.9	)		(26.2	)		(2.8	)
Income tax expense (benefit)		1.3			0.2			(6.0	)		(0.6	)
Net loss from continuing operations	$	(20.2	)		(3.1	)%	$	(20.2	)		(2.2	)%
Net loss from continuing operations per common share — basic and diluted	$	(0.41	)				$	(0.42	)

Net sales for the three months ended June 30, 2009 were $288.3 million, compared to $449.9 million in the three months ended June 30, 2008, a decrease of $161.6 million or 35.9%. Net sales for the six months ended June 30, 2009 were $645.1 million, compared to $927.1 million in the six months ended June 30, 2008, a decrease of $282.0 million or 30.4%. The decrease in net sales in both the three and six month periods was driven by weak retail conditions and decisions to abandon unprofitable products, customers, and programs, resulting in lower sales volume, and by higher price discounts.

Gross profit for the three months ended June 30, 2009 was $61.6 million compared to $100.4 million for the three months ended June 30, 2008. Gross profit for the six months ended June 30, 2009 was $142.0 million compared to $211.4 million for the six months ended June 30, 2008. The decline in gross profit in both the three and six month periods is primarily attributable to lower sales volume and higher price discounts, partially offset by reductions in product write-downs. We expect to realize improved margins in the future due to increased production efficiency driven by our recent restructuring activities, lower materials cost, and lower transportation cost.

19

Selling, general, and administrative expenses for the three months ended June 30, 2009 were $76.0 million compared to $132.0 million in the three months ended June 30, 2008. Selling, general, and administrative expenses for the six months ended June 30, 2009 were $159.2 million compared to $234.0 million in the six months ended June 30, 2008. The decrease in selling, general, and administrative costs in both the three and six month periods was primarily due to lower compensation and incentive plan costs, advertising expenses, bad debt expense, and professional fees, partially offset by higher occupancy expense. The higher occupancy expense is primarily related to the addition of 22 Thomasville retail stores since the second quarter of 2008, which primarily represent acquisitions where we had subleased the facility to dealers or guaranteed dealer lease payments, partially offset by the closing of 8 non-Thomasville retail stores since the second quarter of 2008.

Interest expense totaled $1.5 million and $3.3 million for the three and six months ended June 30, 2009, respectively, compared to $2.8 million and $6.9 million for the three and six months ended June 30, 2008, respectively. The decrease in interest expense in both the three and six month periods resulted from reduced long-term debt and lower interest rates.

Other income, net consists of the following (in millions):

	Three Months Ended June 30,					Six Months Ended June 30,
	2009		2008			2009		2008
Interest Income	$	0.6	$	1.5		$	1.3	$	3.2
Other		0.2		(0.4	)		0.4		0.1
	$	0.8	$	1.1		$	1.7	$	3.3

Interest income includes interest received on short-term investments, notes receivable, and past due accounts receivable.

The effective income tax rate for continuing operations was (6.9)% for the six months ended June 30, 2009 and 22.8% for the six months ended June 30, 2008. The tax expense for the six months ended June 30, 2009 primarily resulted from minimum liabilities in states that assess tax based on gross receipts and losses for which the income tax benefit was offset by valuation allowances recorded during the period. The tax benefit for the six months ended June 30, 2008 primarily resulted from losses for which the income tax benefit was recognized during the period.

Loss per common share from continuing operations was $0.33 and $0.41 for the three and six months ended June 30 2009, respectively, compared to $0.49 and $0.42 for the three and six month periods ended June 30, 2008, respectively. Weighted average common shares outstanding used in the calculation of net earnings per common share were 48.7 million for the three and six months ended June 30, 2009 and 48.8 million and 48.7 million for the three and six months ended June 30, 2008, respectively.

Net earnings from discontinued operations, including the gain on the sale of Hickory Business Furniture of $28.9 million, were $29.9 million in the six months ended June 30, 2008.

20

RETAIL RESULTS OF OPERATIONS

As a supplement to the information required in this Form 10-Q, we have summarized the following results of our company-owned Thomasville Home Furnishings Stores and all other company-owned retail stores:

	Thomasville Stores (a)						All Other Retail Stores(b)
	Three Months Ended June 30,						Three Months Ended June 30,
(Dollars in millions)	2009			2008			2009			2008
Net sales	$	19.5		$	14.8		$	10.3		$	19.6
Cost of sales		11.4			8.1			6.7			12.7
Gross profit		8.2			6.7			3.5			7.0
Selling, general, and administrative expenses		13.9			8.1			7.6			22.1
Operating loss	$	(5.7	)	$	(1.4	)	$	(4.1	)	$	(15.1	)
Number of stores at end of period		46			24			16			24
Number of closed locations at end of period		—			—			26			20
Same-store-sales(c):
Quarterly percentage		(31.5	)%			(d)			(d)			(d)
Number of stores		20				(d)			(d)			(d)
	Thomasville Stores (a)						All Other Retail Stores(b)
	Six Months Ended June 30,						Six Months Ended June 30,
(Dollars in millions)	2009			2008			2009			2008
Net sales	$	39.1		$	25.7		$	20.5		$	35.3
Cost of sales		22.8			14.3			13.2			22.3
Gross profit		16.3			11.4			7.3			13.0
Selling, general, and administrative expenses		27.6			14.3			16.2			33.3
Operating loss	$	(11.3	)	$	(2.9	)	$	(8.9	)	$	(20.3	)
Same-store-sales(c):
Six months ended percentage		(27.5	)%			(d)			(d)			(d)
Number of stores		20				(d)			(d)			(d)

a)	This supplemental data includes only Thomasville retail store locations that were open at the end of the three and six months ended June 30, 2009 and 2008.
b)	This supplemental data includes all retail stores other than open Thomasville stores. This data also includes costs of $0.6 million and $11.2 million in the three months ended June 30, 2009 and 2008, respectively, and $2.0 million and $13.4 million in the six months ended June 30, 2009 and 2008, respectively, associated with closed retail locations which includes occupancy costs, lease termination costs, and costs associated with closed store lease liabilities, including credits for the reversal of $1.9 million of previously accrued lease liability in the three months ended June 30, 2009, which was associated with closed retail locations that we now plan to reopen.
c)	Quarterly and six months ended same-store-sales percentage is based on sales from stores that have been in operation and company-owned for at least 15 months.
d)	Not meaningful due to the small number of open stores in the same-store calculation.
e)	Operating loss does not include our wholesale profit on the above retail net sales.

In addition to the above company-owned stores, there were 85 and 121 Thomasville dealer-owned stores at June 30, 2009 and 2008, respectively.

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FINANCIAL CONDITION

Liquidity

Cash and cash equivalents at June 30, 2009 totaled $77.3 million, compared to $106.6 million at December 31, 2008. Net cash provided by operating activities for the six months ended June 30, 2009 totaled $35.5 million compared with $39.6 million for the six months ended June 30, 2008. Lower net losses from operations and higher receipt of income tax refund receivable contributed increased cash flow from operations in the six months ended June 30, 2009 as compared to 2008, but were offset by lower cash generated from working capital and higher payments of long-term incentive compensation. Net cash used by investing activities for the six months ended June 30, 2009 totaled $3.8 million compared with net cash provided by investing activities of $58.1 million in the six months ended June 30, 2008. The decrease in cash provided by investing activities is primarily the result of a reduction of proceeds from the sale of business in the six months ended June 30, 2009 as compared to 2008, partially offset by fewer acquisitions of stores requiring cash payments and fewer additions to property, plant and equipment in the six months ended June 30, 2009 as compared to 2008. Net cash used by financing activities totaled $61.0 million in the six months ended June 30, 2009 compared with $84.7 million in the six months ended June 30, 2008. Net cash used by financing activities in the six months ended June 30, 2009 consisted of payment of long-term debt. Net cash used by financing activities in the six months ended June 30, 2008 consisted of payment of long-term debt ($80.8 million, net of restricted cash) and cash dividends ($3.9 million).

Working capital was $382.5 million at June 30, 2009, compared to $458.4 million at December 31, 2008. The current ratio was 3.5-to-1 at June 30, 2009, compared to 3.0-to-1 at December 31, 2008. The decrease in working capital resulted from reductions in inventories, receivables, income tax refund receivable and cash and cash equivalents, partially offset by reductions in accrued employee compensation, accounts payable, and current maturities of long-term debt. As described in the next section on “Financing Arrangements,” our borrowings under our asset-based loan (“ABL”) are limited by the amount of our eligible accounts receivable and inventory. Therefore, as our accounts receivable and inventory decrease in total, the amount we can borrow under our ABL decreases. In the six months ended June 30, 2009, $61.0 million of cash was used in the payment of long-term debt, the payment of which was driven primarily by the decrease in our inventory and accounts receivable.

The primary items impacting our liquidity in the future are cash from operations, capital expenditures, acquisition of stores, sale of surplus assets, borrowings and payments under our ABL, and pension funding requirements.

At June 30, 2009, we had $129.0 million of debt outstanding and excess availability to borrow up to an additional $13.1 million subject to certain covenants as described in Financing Arrangements below. Should we not comply with certain of the provisions of our ABL agreement, the lenders can call the debt, which could have a significantly adverse impact to our liquidity and our business. While we expect to comply with the provisions of the agreement throughout 2009, further deterioration in the economy and our results could cause us to not be in compliance with our ABL agreement. While we would attempt to obtain waivers for noncompliance, we may not be able to obtain waivers, which could have a significantly adverse impact to our liquidity and our business.

In light of the recent deterioration of the global economy and uncertainty about these conditions in the foreseeable future, we are focused on effective cash management, controlling costs, and preserving cash related to capital expenditures and acquisition of stores. For example, we reviewed all capital projects for 2009 and are committed to execute only on those projects that are either necessary for business operations or have an adequate expected rate of return. Also, we will acquire stores only if we are required as the prime tenant on the lease or if we expect an adequate return on our investment. However, if we do not have sufficient cash reserves, cash flow from our operations, or our borrowing capacity under our ABL is insufficient, we may need to raise additional funds through equity or debt financings in the future in order to meet our operating and capital needs. Nevertheless, we may not be able to secure adequate debt or equity financing on favorable terms, or at all, at the time when we need such funding. In the event that we are unable to raise additional funds, our liquidity will be adversely impacted and our business could suffer. If we are able to secure additional financing, these funds could be costly to secure and maintain, which could significantly impact our earnings and our liquidity.

Financing Arrangements

Long-term debt consists of the following (in millions):

	June 30,		December 31,
	2009		2008
Asset-based loan	$	129.0	$	190.0
Less: current maturities		19.0		30.0
Long-term debt	$	110.0	$	160.0

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On August 9, 2007 we refinanced our revolving credit facility with a group of financial institutions. The facility is a five-year asset-based loan (“ABL”) with commitments to lend up to $450.0 million. The facility is secured by all of our accounts receivable, inventory and cash and is guaranteed by all of our domestic subsidiaries.

The ABL provides for the issuance of letters of credit and cash borrowings. The issuance of letters of credit and cash borrowings are limited by the level of a borrowing base consisting of eligible accounts receivable and inventory. As of June 30, 2009 there were $129.0 million of cash borrowings and $20.5 million in letters of credit outstanding.

The excess of the borrowing base over the current level of letters of credit and cash borrowings outstanding represents the additional borrowing availability under the ABL. Certain covenants and restrictions, including cash dominion, weekly borrowing base reporting, and a fixed charge coverage ratio, would become effective if excess availability fell below various thresholds. If we fall below $75.0 million of availability, we are subject to cash dominion and weekly borrowing base reporting. If we fall below $62.5 million of availability, we are also subject to the fixed charge coverage ratio, which we currently do not meet. As of June 30, 2009, excess availability was $75.6 million. Therefore, we have $0.6 million of availability without being subject to the cash dominion and weekly reporting covenants of the agreement and $13.1 million of availability before we would be subject to the fixed charge coverage ratio.

We manage our excess availability to remain above the $75.0 million threshold, as we choose not to be subject to the cash dominion and weekly reporting covenants. We do not expect to be below the threshold in 2009. In addition to our borrowing capacity described above, we had $77.3 million of cash and cash equivalents at June 30, 2009. On July 27, 2009, we repaid $19.0 million of our long-term debt, which we have classified as current in our consolidated balance sheet.

The borrowing base is reported on the 25th day of each month based on our financial position for the previous month end. Our borrowing base calculations are subject to periodic examinations by the financial institutions which can result in adjustments to the borrowing base and our availability under the ABL. These examinations have not resulted in significant adjustments to our borrowing base or availability in the past and are not expected to result in material adjustments in the future.

Cash borrowings under the ABL will be at either (i) a base rate (the greater of the prime rate or the Federal Funds Effective Rate plus 1/2%) or (ii) an adjusted Eurodollar rate plus an applicable margin, depending upon the type of loan selected. The applicable margin over the adjusted Eurodollar rate is 1.50% as of June 30, 2009 and will fluctuate with excess availability. As of June 30, 2009, loans outstanding under the ABL consisted of $110.0 million based on the adjusted Eurodollar rate at a weighted average interest rate of 2.10% and $19.0 million based on the adjusted prime rate at an interest rate of 3.25%. The weighted average interest rate for all loans outstanding as of June 30, 2009 was 2.27%.

Under the terms of the ABL, we are required to comply with certain operating covenants and provide certain representations to the financial institutions, including a representation after each annual report is filed with the Securities and Exchange Commission that our pension underfunded status does not exceed $50.0 million for any plan. After the filing of our Form 10-K for the year ended December 31, 2008, we would not have been in compliance with this representation. However, we obtained a waiver to this required representation until the later of February 28, 2010 or such date, not to exceed January 1, 2011, that the pension relief, under the Worker, Retiree, and Employer Recovery Act of 2008, signed into law on December 23, 2008, ceases to be applicable to our plan. As consideration for the waiver, we agreed to the modification of certain administrative clauses in the ABL agreement, and as a result we agreed to 1) submit condensed mid-month borrowing base information and 2) increase the frequency, from quarterly to monthly, at which we submit certain financial information to the financial institutions.

We believe our current cash position along with our cash flow from operations, sale of surplus assets, and ABL availability will be sufficient to fund our liquidity requirements for the foreseeable future.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

Off-Balance Sheet Arrangements

We are the prime tenant for operating leases and have subleased the premises to independent furniture dealers. In addition, we guarantee many leases of company-brand stores operated by independent furniture dealers. These subleases and guarantees have remaining terms ranging from one to twelve years and generally require us to make lease payments in the event of default by the dealer. In the event of default, we have the right to assign or assume the lease. Total future payments applicable to subleases and lease guarantees were $43.9 million as of June 30, 2009.

Funded Status of the Defined Benefit Pension Plan

The projected benefit obligation of our defined benefit plans exceeded the fair value of plan assets by $137.3 million at December 31, 2008, the measurement date for our pension liability. In December 2008, the federal government passed legislation that provides relief through 2010 from the funding requirements under the Pension Protection Act of 2006 due

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to the widespread nature of disruption in financial markets. Due to this legislation, we do not expect to make cash pension contributions in 2009. However, if the relief provided by the federal government is no longer applicable to our pension plans, if there is continued downward pressure on the asset values of these plans, or if the assets fail to recover in value, it would necessitate significantly increased funding of our plans in the future.

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations is based upon the Consolidated Financial Statements and Notes to the Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates, judgments, and assumptions, which we believe to be reasonable, based on the information available. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. Actual results could differ from those estimates. On an ongoing basis, we evaluate the continued appropriateness of our accounting policies and resulting estimates to make adjustments we consider appropriate under the facts and circumstances.

We have chosen accounting policies we believe are appropriate to report accurately and fairly our operating results and financial position, and we apply those accounting policies in a consistent manner. Accounting policies we consider most critical are described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2008.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 (“SFAS 157”),Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value in U. S. GAAP, and expands the disclosure requirements regarding fair value measurements. The rule does not introduce new requirements mandating the use of fair value. SFAS 157 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The definition is based on an exit price rather than an entry price, regardless of whether the entity plans to hold or sell the asset. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The required transition date for SFAS 157 was delayed until fiscal years beginning after November 15, 2008 for non-financial assets and liabilities, except for those that are recognized or disclosed at fair value in the financial statements on a recurring basis. The adoption on January 1, 2008 of the portion of SFAS 157 that was not delayed until fiscal years beginning after November 15, 2008 did not have a material effect on our financial position or results of operations. The adoption of the remaining provisions of SFAS 157 on January 1, 2009 did not have a material effect on our financial position or results of operations.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (Revised 2007) (“SFAS 141R”),Business Combinations. SFAS 141R requires an acquiring entity to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We adopted the provisions of SFAS 141R on January 1, 2009. The adoption of this statement did not effect our financial position or results of operations.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160 (“SFAS 160”),Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51. SFAS 160establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The adoption of SFAS 160 on January 1, 2009 did not affect our financial position or results of operations.

In December 2008, the FASB issued FASB Staff Position No. FAS 132R-1 (“FSP FAS 132R-1”),Employers’ Disclosures about Postretirement Benefit Plan Assets. FSP FAS 132R-1 enhances the required disclosures related to postretirement benefit plan assets including disclosures concerning a company’s investment policies for benefit plan assets, categories of plan assets, fair value measurements of plan assets, and concentrations of risk within plan assets. The adoption of this statement will not effect our financial position or results of operations as it will only impact the disclosures in our annual report for the fiscal year ended December 31, 2009.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168 (“SFAS 168”),The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162. SFAS 168 will become the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. This statement is not intended to change existing U.S. GAAP.

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SUBSEQUENT EVENTS

Effective August 3, 2009, our Board of Directors adopted a Stockholders Rights Agreement (the “Rights Agreement”) to reduce the risk of limitation of the Company’s net operating loss carryforwards and certain other tax benefits or attributes under Section 382 of the Internal Revenue Code. The Rights Agreement replaces the Company’s prior stockholders rights plan and reduces the threshold percentage of beneficial ownership of the Company’s common stock by any person or group that would trigger the rights under the Rights Agreement from 15% to 4.75% (an “Acquiring Person”), with the exception of stockholders that currently own 4.75% or more of the common stock would not be deemed to be an Acquiring Person so long as they acquired no more than an additional 0.5% of the common stock, up to a maximum of 15%. In addition, in its discretion, the Board may exempt certain transactions and certain persons whose acquisition of securities is determined by the Board not to jeopardize the Company’s net deferred tax assets and whose holdings following such acquisition will not equal or exceed 15% of the Company’s outstanding common stock.

In connection with the adoption of the Rights Agreement, the Board of Directors declared a distribution of one right (a “Right”) for each outstanding share of Common Stock, no par value, of the Company (the “Common Stock”) to the stockholders of record as of the close of business on August 13, 2009, and for each share of Common Stock issued by the Company thereafter and prior to the distribution date. Each Right entitles the holder, subject to the terms of the Rights Agreement, to purchase from the Company one one-thousandth of a share (a “Unit”) of Series B Junior Participating Preferred Stock, no par value (“Series B Preferred Stock”), at a purchase price of $20.00 per Unit, subject to adjustment (the “Purchase Price”).

In general, the Rights will become exercisable upon the earlier of (i) 10 business days following a public announcement that a person or group has become an Acquiring Person or (ii) 10 business days following the commencement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person. In the event that a person or group becomes an Acquiring Person, then each holder of a Right (other than those held by the Acquiring Person) will have the right to receive, upon exercise, shares of Common Stock having a value equal to two times the exercise price of the Right. The exercise price is the Purchase Price multiplied by the number of Units of Series B Preferred Stock issuable upon exercise of a Right prior to the events described in this paragraph.

The Rights will expire at the close of business on July 30, 2011 unless earlier redeemed or exchanged by the Company.

The Rights Agreement and Certificate of Designation of Series B Junior Participating Preferred Stock are incorporated herein by reference to our Report on Form 8-K, filed with the Securities and Exchange Commission on August 4, 2009.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have exposure to market risk from changes in interest rates. Our exposure to interest rate risk consists of interest expense on our asset-based loan and interest income on our cash equivalents. A 10% interest rate increase would result in additional interest expense of $0.15 million annually.

Item 4.CONTROLS AND PROCEDURES

(a)	Evaluation of Disclosure Controls and Procedures
	Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such terms are defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), as of March 31, 2009, the end of the period covered by this Quarterly Report on Form 10-Q.
	Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
	As previously reported in our Annual Report on Form 10-K filed with the SEC on March 2, 2009, management concluded that our company did not maintain effective internal control over financial reporting as of December 31, 2008, based on the criteria established in the Committee of Sponsoring Organizations of the Treadway Commission (“COSO’s”) Internal Control — Integrated Framework as a result of a material weakness in our accounting for income taxes. We have designed procedures we believe will remediate this material weakness and begun implementation of these procedures. Certain of these procedures are performed on a quarterly basis while others are performed only on an annual basis. The quarterly procedures have been fully implemented in the second quarter of fiscal 2009 and the annual procedures will be fully implemented by the end of fiscal 2009. In order to evaluate whether the material weakness has been remediated, we must successfully test the effectiveness of the new procedures over this period of time. Therefore, we expect that the material weakness will be remediated by the end of fiscal 2009.
	Notwithstanding the material weakness described above, management concluded that our consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with accounting principles generally accepted in the United States for each of the periods presented herein.
(b)	Changes in Internal Control over Financial Reporting
	In 2009, as part of our planned consolidation of certain administrative and support functions, we implemented a new centralized payroll system to reduce complexity and lower costs. As a result, we updated our internal controls to reflect the changes to our business processes and financial reporting procedures. Other than the changes related to the payroll system implementation and the changes discussed in (a) above, there has not been any other changes in our internal control over financial reporting during the quarter ended June 30, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

In April 2009, a shareholder derivative suit was filed in the Circuit Court of St. Louis County, Missouri against Furniture Brands International, Inc. (as a nominal defendant) and against current directors and certain current and former officers of the company. The complaint alleges corporate waste and a breach of fiduciary duty by the directors with respect to the approval of certain compensation payments made to executive officers of the company. The complaint also alleges unjust enrichment claims against certain executive officers. The complaint seeks, among other things, unspecified damages based on the purported breach of fiduciary duties and the return of certain compensation paid to certain executive officers. In May 2009, a second similar shareholder derivative suit was filed in the Circuit Court of the City of St. Louis, Missouri against Furniture Brands International, Inc. (as nominal defendant) and against current and former directors and executive officers of the company alleging breaches of fiduciary duties and seeking damages similar to those set forth in the first complaint. Defendants filed a motion to dismiss the first complaint on June 15, 2009 and the parties filed a joint stipulation on July 31, 2009 requesting the court transfer the second complaint to the Circuit Court of St. Louis County. The motion to dismiss and the stipulation are currently pending with the courts.

It is too early for the company to reach a conclusion as to the ultimate outcome of this action. However, we believe that the lawsuit is without merit.

Refer to Part 1, Note 15 to the Consolidated Financial Statements in this form 10-Q, which is incorporated herein by reference.

Item 1A. RISK FACTORS

Our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 includes a detailed discussion of certain risk factors in Part I, Item 1A. The information presented below updates and should be read in conjunction with the risk factors and information disclosed in that Form 10-K. Any of these risks could materially and adversely affect our business, results of operations, and financial condition. Additional risks and uncertainties that we are unaware of or that we currently deem immaterial also may become important factors that affect our company.

A change in control could limit the use of our net operating loss carryforwards and decrease a potential acquirer’s valuation of our businesses.

If a change in control occurs pursuant to applicable statutory regulations, we are potentially subject to limitations on the use of our net operating loss carryforwards which in turn could adversely impact our future liquidity and profitability. A change in control could also decrease a potential acquirer’s valuation of our businesses and discourage a potential acquirer from purchasing our businesses.

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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At our annual meeting of stockholders held on May 7, 2009, the following matters were voted on:

     1. Election of eight directors to the Board of Directors.

	For		Against		Abstain
Wilbert G. Holliman		28,143,304		9,004,768		7,248,807
John R. Jordan, Jr.		23,104,132		14,045,138		7,247,609
Ira D. Kaplan		28,104,630		9,013,388		7,278,860
Bobby L. Martin		23,119,880		14,029,602		7,247,399
Maureen A. McGuire		33,687,775		3,460,022		7,249,083
Aubrey B. Patterson		21,697,406		15,451,637		7,247,838
Alan G. Schwartz		28,219,382		8,928,477		7,249,019
Ralph P. Scozzafava		28,273,667		8,873,567		7,249,646

     2. Reimbursement of certain expenses incurred by SCSF Equities, LLC in connection with its 2008 proxy contest.

For	Against	Abstain	Broker Non-Votes
19,562,834	21,436,906	88,282	3,308,861

     3. Ratify the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2009.

For	Against	Abstain
44,315,070	57,948	23,862

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Item 6. EXHIBITS

Exhibit		Filed	Incorporated by Reference
Index		with this		Filing Date
No.	Exhibit Description	Form 10-Q	Form	with the SEC	Exhibit No.
3.1	Restated Certificate of Incorporation of the Company, as amended		10-Q	May 14, 2002		3
3.2	By-Laws of the Company, as amended effective as of August 7, 2008		8-K	August 13, 2008		3.1
3.3	Certificate of Designation of Series B Junior Participating Preferred Stock		8-K	August 4, 2009		3.1
4.1	Stockholders Rights Agreement, dated as of August 3, 2009, between the Company and American Stock Transfer and Trust Company, LLC, as Rights Agent		8-K	August 4, 2009		4.1
10.1	Form of Indemnification Agreement with Directors, as amended	X
10.2	Amended and Restated Restricted Stock Plan for Outside Directors	X
31.1	Certification of Ralph P. Scozzafava, Chairman of the Board and Chief Executive 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	X
31.2	Certification of Steven G. Rolls, Chief Financial Officer (Principal 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	X
32.1	Certification of Ralph P. Scozzafava, Chairman of the Board and Chief Executive 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	X
32.2	Certification of Steven G. Rolls, Chief Financial Officer (Principal 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	X

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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 G. Rolls
	Steven G. Rolls
	Chief Financial Officer (On behalf of the registrant and as Principal Financial Officer) Date: August 7, 2009

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EXHIBIT INDEX

Exhibit		Filed	Incorporated by Reference
Index		with this		Filing Date
No.	Exhibit Description	Form 10-Q	Form	with the SEC	Exhibit No.
3.1	Restated Certificate of Incorporation of the Company, as amended		10-Q	May 14, 2002		3
3.2	By-Laws of the Company, as amended effective as of August 7, 2008		8-K	August 13, 2008		3.1
3.3	Certificate of Designation of Series B Junior Participating Preferred Stock		8-K	August 4, 2009		3.1
4.1	Stockholders Rights Agreement, dated as of August 3, 2009, between the Company and American Stock Transfer and Trust Company, LLC, as Rights Agent		8-K	August 4, 2009		4.1
10.1	Form of Indemnification Agreement with Directors, as amended	X
10.2	Amended and Restated Restricted Stock Plan for Outside Directors	X
31.1	Certification of Ralph P. Scozzafava, Chairman of the Board and Chief Executive 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	X
31.2	Certification of Steven G. Rolls, Chief Financial Officer (Principal 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	X
32.1	Certification of Ralph P. Scozzafava, Chairman of the Board and Chief Executive 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	X
32.2	Certification of Steven G. Rolls, Chief Financial Officer (Principal 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	X

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