FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996 or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number I-91
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Furniture Brands International, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 43-0337683
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 South Hanley Road, St. Louis, Missouri 63105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 863-1100
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INTERCO INCORPORATED
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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 requirement for the past 90 days.
Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
60,173,638 Shares as of April 30, 1996
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PART I FINANCIAL INFORMATION
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Item 1. Financial Statements
Consolidated Financial Statements for the quarter ended March 31, 1996.
Consolidated Balance Sheets
Consolidated Statements of Operations:
Three Months Ended March 31, 1996
Three Months Ended March 31, 1995
Consolidated Statements of Cash Flows:
Three Months Ended March 31, 1996
Three Months Ended March 31, 1995
Notes to Consolidated Financial Statements
Separate financial statements and other disclosures with respect to the
Company's subsidiaries are omitted as such separate financial statements
and other disclosures are not deemed material to investors.
The financial statements are unaudited, but include all adjustments
(consisting of normal recurring adjustments) which the management of the
Company considers necessary for a fair presentation of the results of the
period. The results for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
March 31, December 31,
1996 1995
ASSETS ------------ -----------
Current assets:
Cash and cash equivalents....................... $ 30,572 $ 26,412
Receivables, less allowances of $22,204
($20,724 at December 31, 1995)................ 284,127 276,116
Inventories...........................(Note 1).. 269,479 269,677
Prepaid expenses and other current assets....... 18,471 17,888
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Total current assets.......................... 602,649 590,093
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Property, plant and equipment..................... 394,475 389,429
Less accumulated depreciation................... 93,691 83,023
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Net property, plant and equipment............. 300,784 306,406
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Intangible assets, net............................ 366,840 370,307
Other assets...................................... 28,425 24,933
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$ 1,298,698 $ 1,291,739
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt............ $ 18,656 $ 18,639
Accrued interest expense........................ 3,147 1,304
Accounts payable and other accrued expenses..... 132,834 115,114
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Total current liabilities..................... 154,637 135,057
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Long-term debt, less current maturities.(Note 2).. 596,019 705,040
Other long-term liabilities....................... 152,772 150,486
Shareholders' equity:
Preferred stock, authorized 10,000,000
shares, no par value - issued none............ - -
Common stock, authorized 100,000,000 shares,
$1.00 stated value - issued 60,120,888
shares at March 31, 1996 and 50,120,079
shares at December 31, 1995.........(Note 2).. 60,121 50,120
Paid-in capital................................. 291,429 218,156
Retained earnings............................... 43,720 32,880
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Total shareholders' equity.................... 395,270 301,156
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$ 1,298,698 $ 1,291,739
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FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
1996 1995
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Net sales...................................... $ 423,947 $ 285,904
Costs and expenses:
Cost of operations........................... 308,883 203,235
Selling, general and administrative expenses. 70,204 51,550
Depreciation and amortization................ 14,178 9,838
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Earnings from operations....................... 30,682 21,281
Interest expense............................... 13,715 8,763
Other income, net.............................. 747 674
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Earnings before income tax expense............. 17,714 13,192
Income tax expense............................. 6,867 5,449
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Net earnings................................... $ 10,847 $ 7,743
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Net earnings per common share:
Primary...................................... $ 0.19 $ 0.15
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Fully diluted................................ $ 0.19 $ 0.15
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Weighted average common and common
equivalent shares outstanding:
Primary...................................... 55,794,225 50,626,060
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Fully diluted................................ 55,982,283 50,626,841
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FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
1996 1995
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Cash Flows from Operating Activities:
Net earnings.............................. $ 10,847 $ 7,743
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation of property, plant and equipment 11,084 7,405
Amortization of intangible and other assets.. 3,094 2,433
Noncash interest expense..................... 617 711
Increase in receivables...................... (8,011) (10,174)
(Increase) decrease in inventories........... 198 (5,917)
Increase in prepaid expenses and other assets. (4,672) (1,374)
Increase in accounts payable, accrued interest
expense and other accrued expenses.......... 21,496 14,991
Increase (decrease) in net deferred tax
liabilities................................. 1,740 (1,249)
Increase in other long-term liabilities..... 892 47
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Net cash provided by operating activities........ 37,285 14,616
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Cash Flows from Investing Activities:
Proceeds from the disposal of assets........... 1,836 1
Additions to property, plant and equipment..... (7,298) (4,332)
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Net cash used by investing activities.......... (5,462) (4,331)
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Cash Flows from Financing Activities:
Payments of long-term debt..................... (109,004) (8,488)
Proceeds from the sale of common stock......... 81,335 -
Proceeds from the issuance of common stock..... 6 198
Payments for the repurchase of common stock warrants - (1,981)
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Net cash used by financing activities........... (27,663) (10,271)
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Net increase in cash and cash equivalents........ 4,160 14
Cash and cash equivalents at beginning of period. 26,412 32,145
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Cash and cash equivalents at end of period....... $ 30,572 $ 32,159
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Supplemental Disclosure:
Cash payments for income taxes................... $ 231 $ 227
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Cash payments for interest expense............... $ 11,243 $ 6,675
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Inventories are summarized as follows, in thousands:
March 31, December 31,
1996 1995
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Finished products $ 113,060 $ 114,857
Work-in-process 53,058 51,259
Raw materials 103,361 103,561
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$ 269,479 $ 269,677
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(2) On March 1, 1996, the Company completed its offering of ten million common
shares generating net cash proceeds of $81.3 million which were used to
repay long-term debt. This long-term debt payment was applied in reverse
order of maturity to the term loan "C" facility of the Secured Credit
Agreement.
(3) In February 1996, the Company entered into interest rate swap agreements
with two financial institutions to reduce the impact of changes in
interest rates on its floating rate long-term debt. The two agreements,
having a total notional principal amount of $300.0 million, mature in
three years. The Company is exposed to credit loss in the event of
nonperformance by the other parties to the interest rate swap agreement;
however, the Company does not anticipate nonperformance by the
counterparties.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
RESULTS OF OPERATIONS
Furniture Brands International, Inc. (the "Company") is a major manufacturer of
residential furniture. The Company has three primary operating subsidiaries;
Broyhill Furniture Industries, Inc., The Lane Company, Incorporated and
Thomasville Furniture Industries, Inc.
On December 29, 1995, the Company acquired Thomasville Furniture Industries,
Inc. ("Thomasville"). The transaction was accounted for as a purchase and,
since the acquisition occurred as of the last business day of 1995, has been
reflected in the Company's consolidated balance sheet as of December 31, 1995.
The Company's results of operations for 1995 do not include any of the
operations of Thomasville.
Comparison of Three Months Ended March 31, 1996 and 1995
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Selected financial information for the three months ended March 31, 1996 and
1995 is presented below:
($ in millions, except per share data)
Three Months Ended
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March 31, 1996 March 31, 1995
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% of % of
$ net sales $ net sales
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Net sales 423.9 100.0% 285.9 100.0%
Earnings from operations 30.7 7.2% 21.3 7.4%
Interest expense 13.7 3.2% 8.8 3.1%
Income tax expense 6.9 1.6% 5.5 1.9%
Net earnings 10.8 2.5% 7.7 2.7%
Net earnings per common share 0.19 - 0.15 -
For the three months ended March 31, 1996, net sales increased by $138.0
million, or 48.3%, compared to an increase for the three months ended March 31,
1995 of 6.4%. The improved sales performance resulted primarily from the
acquisition of Thomasville.
Earnings from operations for the three months ended March 31, 1996 increased by
$9.4 million or 44.2% over the same period of the prior year. Earnings from
operations were 7.2% and 7.4% of net sales for the three months ended March 31,
1996 and 1995, respectively. The increase in operating earnings was primarily
the result of the Thomasville acquisition. The decrease in operating margin
versus the prior year was also a result of the Thomasville acquisition.
Interest expense totaled $13.7 million for the three months ended March 31,
1996, compared to $8.8 million for the same period last year. The increase in
interest expense reflects the additional debt incurred for the acquisition of
Thomasville.
For the three months ended March 31, 1996, the Company provided for income
taxes of $6.9 million on pretax earnings of $17.7 million resulting in an
effective income tax rate of 38.8%. The Company provided for income taxes of
$5.5 million on pretax earnings of $13.2 million for the three months ended
March 31, 1995 which represented an effective tax rate of 41.3%. The effective
tax rates for each period were adversely impacted by certain nondeductible
expenses incurred and provisions for state and local taxes.
Net earnings per common share on both a primary and fully diluted basis were
$0.19 for the three months ended March 31, 1996, compared with $0.15 for the
same period last year. Average common and common equivalent shares outstanding
used in the calculation of net earnings per common share on a primary and fully
diluted basis were 55,794,225 and 55,982,283, respectively, for the three
months ended March 31, 1996 and 50,626,060 and 50,626,841, respectively, for
the three months ended March 31, 1995.
FINANCIAL CONDITION
Working Capital
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Cash and cash equivalents at March 31, 1996 amounted to $30.6 million, compared
to $26.4 million at December 31, 1995. During the three months ended March 31,
1996, net cash provided by operating activities totaled $37.3 million, net cash
used by investing activities totaled $5.4 million and net cash used by
financing activities totaled $27.7 million.
Working capital was $448.0 at March 31, 1996, compared to $455.0 million at
December 31, 1995. The current ratio was 3.9 to 1 at March 31, 1996, compared
to 4.4 to 1 at December 31, 1995.
Financing Arrangements
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As of March 31, 1996, long-term debt, including current maturities, consisted
of the following, in millions:
Secured credit agreement 413.0
Receivables securitization facility 185.0
Other 16.7
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614.7
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On March 1, 1996, the Company completed its offering of ten million common
shares generating net cash proceeds of $81.3 million. The net proceeds of the
offering were used to repay long-term debt.
To meet short-term working capital and other financial requirements, the
Company maintains a $180.0 million revolving credit facility as part of its
Secured Credit Agreement with a group of financial institutions. The revolving
credit facility allows for both issuance of letters of credit and cash
borrowings. Letter of credit outstandings are limited to no more than $60.0
million. Cash borrowings are limited only by the facility's maximum
availability less letters of credit outstanding. At March 31, 1996, there were
$44.0 million of cash borrowings outstanding under the revolving credit
facility and $26.3 million in letters of credit outstanding, leaving an excess
of $109.7 million available under the revolving credit facility.
In addition to the revolving credit facility, the Company also had $25.0
million of excess availability under its Receivables Securitization Facility as
of March 31, 1996.
The Company believes its revolving credit facility, together with cash
generated from operations, will be adequate to meet liquidity requirements for
the foreseeable future.
PART II OTHER INFORMATION
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Item 5. Other Information
On March 1, 1996, the Company changed its corporate name from INTERCO
INCORPORATED to Furniture Brands International, Inc.
Item 6. Exhibits and Reports on Form 8-K
(a) 11. Statement re Computation of Net Earnings Per Common Share.
27. Financial Data Schedule.
(b) A Form 8-K was filed on January 12, 1996, as amended by Form 8-K/A-1
filed on January 16, 1996 and Form 8-K/A-2 filed on February 1, 1996,
reporting the acquisition of Thomasville Furniture Industries, Inc.,
summarizing the Company's amended credit agreements and filing the
agreements as exhibits thereto and a Form 8-K was filed on January 31,
1996 reporting information in the Company's press releases dated
January 30, 1996.
SIGNATURE
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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 Steven W. Alstadt
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Steven W. Alstadt
Controller and
Chief Accounting Officer
Date: May 7, 1996
EXHIBIT 11
FURNITURE BRANDS INTERNATIONAL, INC.
STATEMENT RE COMPUTATION OF NET EARNINGS PER COMMON SHARE
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Three Months Three Months
Ended Ended
March 31, March 31,
1996 1995
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Primary:
Weighted average common shares outstanding during the period......... 53,526,719 50,096,435
Common shares issuable on exercise of stock options (1).............. 842,656 529,625
Common shares issuable on exercise of warrants (2)................... 1,424,850 -
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Weighted average common and common equivalent shares outstanding for
primary calculation................................................ 55,794,225 50,626,060
============ ============
Fully diluted:
Weighted average common and common equivalent shares outstanding for
primary calculation................................................ 55,794,225 50,626,060
Common shares issuable on exercise of stock options (3).............. 29,828 781
Common shares issuable on exercise of warrants (4)................... 158,230 -
------------ ------------
Weighted average common and common equivalent shares outstanding for
fully diluted calculation.......................................... 55,982,283 50,626,841
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EXHIBIT 11 (CONTINUED)
FURNITURE BRANDS INTERNATIONAL, INC.
NOTES TO STATEMENT RE COMPUTATION OF NET EARNINGS PER COMMON SHARE
(1) Includes common stock options, the exercise of which would result in dilution of net earnings per
common share. Such common stock options have been considered as exercised and the proceeds
therefrom were used to purchase common stock at the average common stock market price, if the
average common stock market price was higher than the common stock option exercise price during the
period.
(2) Includes common stock warrants, the exercise of which would result in dilution of net earnings per
common share. Such common stock warrants have been considered as exercised and the proceeds
therefrom were used to purchase common stock at the average common stock market price, if the
average common stock market price was higher than the common stock warrant exercise price during
the period.
(3) Additional common shares issuable resulting from the application of the same principles described
in Note (1), except that the proceeds from assumed common stock options exercised were used to
purchase common stock at the month end common stock market price, if the month end common stock
market price was higher than the average common stock market price during the period.
(4) Additional common shares issuable resulting from the application of the same principles described
in Note (2), except that the proceeds from assumed common stock warrants exercised were used to
purchase common stock at the month end common stock market price, if the month end common stock
market price was higher than the average common stock market price during the period.