INFORMATION
FOR IMMEDIATE RELEASE
FURNITURE BRANDS INTERNATIONAL REPORTS $0.42 EARNINGS PER SHARE
FOR THE SECOND QUARTER OF 2003
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St. Louis, Missouri, July 23, 2003 -- Furniture Brands International (NYSE:FBN)
announced today its financial results for the second quarter and first half of
2003.
Operating Results - Second Quarter
Net sales for the second quarter of 2003 were $579.6 million, compared with
$604.5 million in the second quarter of 2002, a decrease of 4.1%. Net earnings
were $23.6 million as compared to $32.1 million in the second quarter of 2002, a
decrease of 26.5%. Diluted net earnings per common share were $0.42 as compared
to $0.57 in the second quarter of 2002. The company's previous earnings per
share guidance had been in the $0.42 to $0.45 range for the quarter.
Operating Results - First Half
Net sales for the first half of 2003 were $1,193.4 million, compared with
$1,239.0 million in the first half of 2002, a decrease of 3.7%. Net earnings
were $52.6 million as compared to $64.9 million in the first half of 2002, a
decrease of 18.9%. Diluted net earnings per common share were $0.94 as compared
to $1.15 in the first half of 2002.
Management Comments
"The soft business environment the residential furniture industry has been
experiencing for nearly three years continued in the second quarter of this
year," stated W. G. (Mickey) Holliman, Chairman, President and Chief Executive
Officer. "The sales shortfall, which was somewhat larger than expected, together
with operating profit margin compression arising from extensive plant down-time
and increased promotional activity, negatively impacted our second quarter
earnings performance.
"We continued to focus on our balance sheet during the second quarter,
particularly with a view to tightening control of our inventories. While this
strategy has severely hurt earnings, it is positioning the company to achieve
rapid profitability improvement once order trends begin a sustainable recovery.
"In part because of this focus on working capital, we had another good quarter
in terms of operating cash flow. Despite significant income tax payments and
over $15 million in capital expenditures, we were able to reduce our long-term
debt by $11.6 million during the quarter and by $31.6 million in the year's
first half. At the end of the quarter, our long-term debt stood at $343.2
million and our debt-to-book capitalization was 27.0%. We are quickly
approaching our targeted debt level of about $300 million. Despite this
difficult business environment, the company continues to generate substantial
cash flow from operations."
Outlook
Mr. Holliman concluded, "Once again we see nothing, either in our order trends
or in our conversations with retailers, that leads us to believe a near-term
sustainable rebound in business is in sight. Retail activity over the Memorial
Day weekend was strong, but was bolstered to some degree by extensive
promotions. Order trends in the month of June were slightly favorable against
last year, but the results on the July 4th weekend were mixed, and we have not
seen a continuation of June's positive trends in the first part of July. In
short, we still have every reason to believe our sales will be essentially flat
year-over-year in the second half of this year.
"We continue to address our cost structure, and we have recently announced
additional plant closings. Nevertheless, because of the continuing softness in
business, costs and inefficiencies associated with our ongoing domestic
manufacturing realignment, and our focus on reducing our working capital, we
have lowered our operating profit margin assumptions for the balance of the year
and are revising our guidance modestly. We currently expect our third quarter
earnings per share to be in the $0.40 to $0.43 range. We are also revising our
full-year expectation to a range from $1.90 to $1.95. As has been our practice,
we will provide an update on our third quarter and full-year expectations in
early September."
Furniture Brands International is America's largest home furnishings
manufacturer, manufacturing and sourcing its products under six of the
best-known brand names in the industry - Broyhill, Lane, Thomasville, Henredon,
Drexel Heritage and Maitland-Smith. The company markets its products across a
broad spectrum of price categories and distributes its products through an
extensive system of independently owned national, regional and local retailers.
This release contains forward-looking statements within the meaning of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include the company's expected earnings per
share, the prospects for the overall business environment, and other statements
containing the words "expects," "anticipates," "estimates," "believes," and
words of similar import. The company cautions investors that any such
forward-looking statements are not guarantees of future performance and that
certain factors may cause actual results to differ materially from those in the
forward-looking statements. Such factors may include: overall business and
economic conditions and growth in the furniture industry; changes in customer
spending patterns and demand for home furnishings; competitive factors, such as
design and marketing efforts by other furniture manufacturers; pricing
pressures; success of the marketing efforts of retailers and the prospects for
further customer failures; the company's success in furniture design and
manufacture; the effects of manufacturing realignments and cost savings
programs; and other risk factors listed from time to time in the company's
public releases and SEC reports, including but not limited to the most recent
reports on Forms 10-Q and 10-K. The company also cautions investors that our
forecast for the third quarter and the year 2003 represents our outlook only as
of this date, and we undertake no obligation to update or revise any
forward-looking statements, whether as a result of new developments or
otherwise.
A conference call will be held to discuss the second quarter results at 7:30
a.m. (Central Time) on July 24, 2003. The call can be accessed at
www.streetevents.com, or on the company's website at www.furniturebrands.com.
FURNITURE BRANDS INTERNATIONAL
CONSOLIDATED OPERATING RESULTS
(Dollars in thousands except per share)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
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Net sales......................................................... $ 579,612 $604,511 $1,193,456 $ 1,238,972
Costs and expenses:
Cost of operations.............................................. 420,557 429,577 857,056 885,828
Selling, general and administrative expenses.................... 105,414 108,470 219,602 218,768
Depreciation and amortization .................................. 12,614 12,266 25,518 24,822
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Earnings from operations.......................................... 41,027 54,198 91,280 109,554
Interest expense.................................................. 4,868 5,492 9,925 11,094
Other income, net................................................. 959 996 1,728 2,070
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Earnings before income tax expense................................ 37,118 49,702 83,083 100,530
Income tax expense................................................ 13,543 17,617 30,467 35,674
------------ ----------- ----------- -----------
Net earnings...................................................... $ 23,575 $ 32,085 $ 52,616 $ 64,856
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Net earnings per common share (diluted)........................... $ 0.42 $ 0.57 $ 0.94 $ 1.15
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Average diluted common shares
outstanding (in thousands)...................................... 56,216 56,698 56,108 56,570
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FURNITURE BRANDS INTERNATIONAL
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
June 30, December 31,
2003 2002
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Assets
Current assets:
Cash and cash equivalents......................................... $ 14,927 $ 15,074
Receivables, net.................................................. 394,103 375,050
Inventories....................................................... 433,673 432,104
Prepaid expenses and other current assets......................... 31,208 27,231
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Total current assets............................................ 873,911 849,459
Property, plant and equipment, net.................................. 329,352 333,371
Intangible assets................................................... 355,488 355,488
Other assets........................................................ 28,039 29,084
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$ 1,586,790 $ 1,567,402
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Liabilities and Shareholders' Equity
Current liabilities:
Accrued interest expense ......................................... $ 2,813 $ 3,018
Accounts payable and other accrued expenses ...................... 185,751 194,346
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Total current liabilities....................................... 188,564 197,364
Long-term debt ..................................................... 343,200 374,800
Other long-term liabilities......................................... 128,403 125,723
Shareholders' equity ............................................... 926,623 869,515
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$ 1,586,790 $ 1,567,402
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