Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number I-91
Furniture Brands International, Inc.
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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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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 CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
52,192,611 Shares as of July 31, 1998.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Financial Statements for the quarter ended June 30, 1998.
Consolidated Balance Sheets
Consolidated Statements of Operations:
Three Months Ended June 30, 1998
Three Months Ended June 30, 1997
Six Months Ended June 30, 1998
Six Months Ended June 30, 1997
Consolidated Statements of Cash Flows:
Six Months Ended June 30, 1998
Six Months Ended June 30, 1997
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 and six months ended June 30, 1998 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)
ASSETS
June 30, December 31,
1998 1997
Current assets:
Cash and cash equivalents...................... $ 13,783 $ 12,274
Receivables, less allowances of $18,385
($13,793 at December 31, 1997)............... 316,465 293,975
Inventories.........................(Note 1)... 298,665 287,046
Prepaid expenses and other current assets...... 26,285 25,214
Total current assets......................... 655,198 618,509
Property, plant and equipment.................... 478,643 459,692
Less accumulated depreciation.................. 187,775 165,631
Net property, plant and equipment............ 290,868 294,061
Intangible assets................................ 323,774 330,549
Other assets..................................... 19,091 14,117
$ 1,288,931 $ 1,257,236
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued interest expense....................... $ 6,902 $ 7,451
Accounts payable and other accrued expenses.... 145,890 128,770
Total current liabilities.................... 152,792 136,221
Long-term debt........................(Note 2)... 639,200 667,800
Other long-term liabilities...................... 128,877 129,893
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 52,185,711
shares at June 30, 1998 and 52,003,520
shares at December 31, 1997.................. 52,186 52,003
Paid-in capital................................ 126,431 124,595
Retained earnings.............................. 189,445 146,724
Total shareholders' equity................... 368,062 323,322
$ 1,288,931 $ 1,257,236
See accompanying notes to consolidated financial statements.
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
(Unaudited)
Three Months Three Months
Ended Ended
June 30, June 30,
1998 1997
Net sales...................................... $ 470,146 $ 444,152
Costs and expenses:
Cost of operations........................... 334,956 321,342
Selling, general and administrative expenses. 77,313 73,380
Depreciation and amortization................ 14,041 14,415
Earnings from operations....................... 43,836 35,015
Interest expense............................... 11,237 9,405
Other income, net.............................. 638 875
Earnings before income tax expense............. 33,237 26,485
Income tax expense............................. 12,130 9,970
Net earnings................................... $ 21,107 $ 16,515
Net earnings per common share:
Basic........................................ $ 0.40 $ 0.27
Diluted...................................... $ 0.39 $ 0.26
Weighted average common and common
equivalent shares outstanding:
Basic........................................ 52,182,540 61,033,994
Diluted...................................... 53,979,715 63,382,118
See accompanying notes to consolidated financial statements.
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
1998 1997
Net sales...................................... $ 975,444 $ 894,013
Costs and expenses:
Cost of operations........................... 699,024 647,529
Selling, general and administrative expenses. 158,783 146,891
Depreciation and amortization................ 28,878 29,011
Earnings from operations....................... 88,759 70,582
Interest expense............................... 22,500 18,494
Other income, net.............................. 1,285 1,747
Earnings before income tax expense............. 67,544 53,835
Income tax expense............................. 24,823 20,261
Net earnings................................... $ 42,721 $ 33,574
Net earnings per common share:
Basic........................................ $ 0.82 $ 0.55
Diluted...................................... $ 0.79 $ 0.53
Weighted average common and common
equivalent shares outstanding:
Basic........................................ 52,150,711 61,239,722
Diluted...................................... 53,922,895 63,534,866
See accompanying notes to consolidated financial statements.
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Months Six Months
Ended Ended
June 30, June 30,
1998 1997
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Cash Flows from Operating Activities:
Net earnings.........................................$ 42,721 $ 33,574
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation of property, plant and equipment.... 22,848 22,981
Amortization of intangible and other assets...... 6,030 6,030
Noncash interest expense......................... 1,003 552
Increase in receivables.......................... (22,490) (19,971)
Increase in inventories.......................... (11,619) (14,539)
(Increase) decrease in prepaid expenses and
other assets................................... (6,887) 1,071
Increase (decrease) in accounts payable, accrued
interest expense and other accrued expenses.... 15,771 (4,521)
Increase (decrease) in net deferred tax
liabilities.................................... (907) 1,705
Increase (decrease) in other long-term
liabilities.................................... 475 (2,020)
Net cash provided by operating activities............ 46,945 24,862
Cash Flows from Investing Activities:
Proceeds from the disposal of assets................. 35 75
Additions to property, plant and equipment........... (19,690) (17,820)
Net cash used by investing activities................ (19,655) (17,745)
Cash Flows from Financing Activities:
Payments for debt issuance costs..................... - (3,325)
Additions to long-term debt.......................... 8,000 210,000
Payments of long-term debt........................... (35,800) (44,800)
Proceeds from the issuance of common stock........... 2,019 696
Payment for the repurchase and retirement of
common stock....................................... - (168,056)
Payments for the repurchase of common stock warrants. - (5,187)
Payments for common stock offering expenses of
selling stockholders............................... - (905)
Net cash used by financing activities................ (25,781) (11,577)
Net increase (decrease) in cash and cash equivalents... 1,509 (4,460)
Cash and cash equivalents at beginning of period....... 12,274 19,365
Cash and cash equivalents at end of period.............$ 13,783 $ 14,905
Supplemental Disclosure:
Cash payments for income taxes, net..................$ 22,505 $ 27,038
Cash payments for interest...........................$ 22,107 $ 18,624
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)
(1) Inventories are summarized as follows:
June 30, December 31,
1998 1997
Finished products $ 126,549 $ 118,385
Work-in-process 50,065 53,536
Raw materials 122,051 115,125
$ 298,665 $ 287,046
(2) On May 12, 1998, the Company entered into a secured obligation with the
Mississippi Business Finance Corporation to finance the construction of an
expansion of the Company's furniture manufacturing facility in Tupelo,
Mississippi. The industrial revenue bonds totaled $8.0 million with a
weighted average interest rate of 6.60% per annum. The bonds mature in
annual installments of $0.8 million beginning May 1, 1999 and are secured
by the facility and equipment included therein.
In January 1998, the Company entered into an interest rate swap agreement
with a financial institution to reduce the impact of changes in interest
rates on its floating rate long-term debt. The agreement, which matures in
January 2002, has a notional principal amount of $300,000 and an interest
rate of 5.50% per annum. The Company is exposed to credit loss in the event
of nonperformance by the counterparties; however, the Company does not
anticipate nonperformance by the counterparties.
(3) Weighted average shares used in the computation of basic and diluted net
earnings per common share are as follows:
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1988 1997 1998 1997
Weighted average shares used
for basic net earnings per
common share 52,182,540 61,033,994 52,150,711 61,239,722
Effect of dilutive securities:
Stock options 1,797,175 1,429,690 1,772,184 1,384,191
Warrants - 918,434 - 910,953
Weighted average shares used
for diluted net earnings
per common share 53,979,715 63,382,118 53,922,895 63,534,866
Excluded from the computation of diluted net earnings per common share
were options to purchase 66,500 and 94,000 shares at an average price of
$31.38 and $30.45 during the three months and six months ended June 30,
1998, respectively. For the three months and six months ended June 30,
1997, options to purchase 12,500 shares at an average price of $15.38
were excluded from the computation of diluted net earnings per common
share. The securities were excluded from the calculation of diluted
earnings per share because the exercise price was greater than the
average market price of the common stock.
At June 30, 1997, the Company had outstanding approximately 1.4 million
warrants to purchase common stock at $7.13 per share. The warrants, which
included a five-year call protection which expired on August 3, 1997,
were redeemed on August 15, 1997.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
RESULTS OF OPERATIONS
Furniture Brands International, Inc. (the "Company") is the largest manufacturer
of residential furniture in the United States. The Company has three primary
operating subsidiaries: Broyhill Furniture Industries, Inc.; Lane Furniture
Industries, Inc.; and Thomasville Furniture Industries, Inc.
Comparison of Three Months and Six Months Ended June 30, 1998 and 1997
Selected financial information for the three months and six months ended
June 30, 1998 and 1997 is presented below:
($ in millions except per share data)
Three Months Ended
June 30, 1998 June 30, 1997
% of % of
Dollars Net Sales Dollars Net Sales
Net sales $470.1 100.0% $444.1 100.0%
Earnings from operations 43.8 9.3% 35.0 7.9%
Interest expense 11.2 2.4% 9.4 2.1%
Income tax expense 12.1 2.6% 9.9 2.2%
Net earnings 21.1 4.5% 16.5 3.7%
Net earnings per common share-diluted 0.39 - 0.26 -
Gross profit (1) $125.4 26.7% $112.7 25.4%
Six Months Ended
June 30, 1998 June 30, 1997
% of % of
Dollars Net Sales Dollars Net Sales
Net sales $975.4 100.0% $894.0 100.0%
Earnings from operations 88.7 9.1% 70.6 7.9%
Interest expense 22.5 2.3% 18.5 2.1%
Income tax expense 24.8 2.5% 20.2 2.3%
Net earnings 42.7 4.4% 33.6 3.8%
Net earnings per common share-diluted 0.79 - 0.53 -
Gross profit (1) $256.2 26.3% $226.1 25.3%
(1) The Company believes that gross profit provides useful information
regarding a company's financial performance. Gross profit has been
calculated by subtracting cost of operations and the portion of
depreciation associated with cost of goods sold from net sales.
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Net sales $470.1 $444.1 $975.4 $894.0
Cost of operations 334.9 321.3 699.0 647.5
Depreciation (associated with 9.8 10.1 20.2 20.4
cost of goods sold)
Gross profit $125.4 $112.7 $256.2 $226.1
Net sales for the three months ended June 30, 1998 were $470.1 million, compared
to $444.1 million in the three months ended June 30, 1997, an increase of $26.0
million or 5.9%. For the six months ended June 30, 1998, net sales increased
$81.4 or 9.1% to $975.4 million from $894.0 million for the six months ended
June 30, 1997. The improved sales performance occurred at each operating company
and ranged, in varying degrees, across all product lines.
Earnings from operations for the three months ended June 30, 1998 increased by
$8.8 million or 25.2% from the comparable prior year period. Earnings from
operations for the three months ended June 30, 1998 and June 30, 1997 were 9.3%
and 7.9% of net sales, respectively. For the six months ended June 30, 1998,
earnings from operations increased by $18.1 million, or 25.8% from the
comparable six months of 1997. As a percentage of net sales, earnings from
operations for the six months ended June 30, 1998 and June 30, 1997 were 9.1%
and 7.9%, respectively. The increase in operating earnings was due primarily to
continued improvement in cost of operations as a percent of net sales as well as
higher shipments and good control of selling, general and administrative
expenses.
Interest expense totaled $11.2 million and $22.5 million for the three months
and six months ended June 30, 1998, respectively, compared to $9.4 million and
$18.5 million for the prior year comparable periods. The increase in interest
expense during the periods resulted from higher long-term debt levels incurred
from the Company's repurchase of approximately 10.8 million shares of its common
stock at the end of June 1997.
The effective income tax rates were 36.5% and 37.6% for the three months ended
June 30, 1998 and June 30, 1997, respectively, and 36.8% and 37.6% for the six
months ended June 30, 1998 and June 30, 1997, respectively. The effective tax
rates for each period were adversely impacted by certain nondeductible expenses
incurred and provisions for state and local income taxes. The effective tax
rates for the three months and six months ended June 30, 1998 were favorably
impacted due to the reduced effect of the nondeductible expenses as a percentage
of pretax earnings.
Net earnings per common share for basic and diluted were $0.40 and $0.39 for the
three months ended June 30, 1998, respectively, compared with $0.27 and $0.26
for the same period last year, respectively. For the six months ended June 30,
1998 and June 30, 1997, net earnings per common share for basic and diluted were
$0.82 and $0.79, respectively, and $0.55 and $0.53, respectively. Average common
and common equivalent shares outstanding used in the calculation of net earnings
per common share on a basic and diluted basis were 52,183,000 and 53,980,000,
respectively, for the three months ended June 30, 1998, and 61,034,000 and
63,382,000, respectively, for the three months ended June 30, 1997. For the six
months ended June 30, 1998 and June 30, 1997, average common and common
equivalent shares outstanding used in the calculation of net earnings per common
share on a basic and diluted basis were 52,151,000 and 53,923,000, respectively,
and 61,240,000 and 63,535,000, respectively.
FINANCIAL CONDITION
Working Capital
Cash and cash equivalents at June 30, 1998 amounted to $13.8 million, compared
with $12.3 million at December 31, 1997. During the six months ended June 30,
1998, net cash provided by operating activities totaled $46.9 million, net cash
used by investing activities totaled $19.6 million and net cash used by
financing activities totaled $25.8 million.
Working capital was $502.4 at June 30, 1998, compared with $482.3 million at
December 31, 1997. The current ratio was 4.3 to 1 at June 30, 1998, compared to
4.5 to 1 at December 31, 1997.
Financing Arrangements
As of June 30, 1998, long-term debt consisted of the following, in millions:
Secured credit agreement:
Revolving credit facility $210.0
Term loan facility 200.0
Receivables securitization facility 210.0
Other 19.2
$639.2
To meet working capital and other financial requirements, the Company maintains
a $475.0 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 June 30, 1998, there were $210.0 million of cash borrowings
outstanding under the revolving credit facility and $38.2 million in letters of
credit outstanding, leaving an excess of $226.8 million available under the
revolving credit facility.
In addition to the Secured Credit Agreement, the Company also had $15.0 million
of excess availability as of June 30, 1998 under
its Receivables Securitization Facility.
The Company believes its Secured Credit Agreement and Receivables Securitization
Facility, together with cash generated from operations, will be adequate to meet
liquidity requirements for the foreseeable future.
SUBSEQUENT EVENTS
On July 14, 1998 the Company terminated its Receivables Securitization Facility.
On this date the Company also amended its revolving credit facility to increase
the total revolving loan commitment from $475.0 million to $600.0 million. As of
July 14, 1998 the Company had $141.8 million of excess availability under the
revolving credit facility.
On July 20, 1998 the Company received a $9.4 million cash dividend relating to
its minority investment in a company which leases exhibition space to furniture
and accessory manufacturers. This dividend will be used to repay long-term debt,
and will be accounted for as other income in the third quarter results of
operations.
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on May 6, 1998. The directors
listed in the Notice of Annual Meeting of Stockholders dated March 25, 1998 were
elected for terms of one year ending in 1999 with voting for each as follows.
Director For Withheld
K. B. Bell 46,016,015 2,566,578
W. G. Holliman 46,015,482 2,567,111
B. A. Karsh 46,015,253 2,567,340
B. B. Kincaid 46,015,744 2,566,849
D. E. Lasater 46,009,864 2,572,729
L. M. Liberman 46,011,735 2,570,858
R. B. Loynd 46,010,432 2,572,161
M. Portera 45,859,666 2,722,927
A. E. Sutter 46,015,411 2,567,182
Item 5. Other Information
(a) On July 14, 1998, the Company replaced its $225 million receivables
securitization facility by increasing its existing revolving credit
facility from $475 million to $600 million.
(b) On July 30, 1998, the Board of Directors of the Company declared a
dividend of one preferred share purchase right (a "Right") for each
outstanding share of Common Stock, no par value, of the Company (the
"Common Stock"). The dividend distribution is payable on August 12, 1998
(the "Record Date") to the stockholders of record on that date. Each Right
entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series A Junior Participating Preferred Stock,
no par value (the "Preferred Stock") of the Company at a price of $135.00
per one one-hundredth of a share of Preferred Stock (the "Purchase Price"),
subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement dated as of July 30, 1998, as the same may be
amended from time to time (the "Rights Agreement"), between the Company and
The Bank of New York, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) the close of business on the tenth
business day following the date of public announcement or the date on which
the Company first has notice or determines that a person or group of
affiliated or associated persons (other than the Company, any subsidiary of
the Company or any employee benefit plan of the Company) (an "Acquiring
Person") has acquired, or obtained the right to acquire, 15% or more of the
outstanding shares of voting stock of the Company without the prior express
written consent of the Company executed on behalf of the Company by a duly
authorized officer of the Company following express approval by action of
at least a majority of the members of the Board of Directors then in office
(the "Stock Acquisition Date") or (ii) the close of business on the tenth
business day (or such later date as may be determined by action of the
Board of Directors but not later than the Stock Acquisition Date) following
the commencement of a tender offer or exchange offer, without the prior
written consent of the Company, by a person (other than the Company, any
subsidiary of the Company or an employee benefit plan of the Company)
which, upon consummation, would result in such party's control of 15% or
more of the Company's voting stock (the earlier of the dates in clause (i)
or (ii) above being called the "Distribution Date"), the Rights will be
evidenced, with respect to any of the Common Stock certificates outstanding
as of the Record Date, by such Common Stock certificates.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred
with and only with the Company's Common Stock. Until the Distribution Date
(or earlier redemption, exchange or expiration of the Rights), new Common
Stock certificates issued after the Record Date upon transfer or new
issuances of Common Stock will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption,
exchange or expiration of the Rights), the surrender for transfer of any
certificates for shares of Common Stock outstanding as of the Record Date,
even without such notation or a copy of this Summary of Rights, will also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Stock as
of the close of business on the Distribution Date and such separate
certificates alone will then evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire, if not previously exercised, on July 30, 2008 (the "Final
Expiration Date"), unless the Final Expiration Date is extended or unless
the Rights are earlier redeemed or exchanged by the Company.
The Purchase Price payable, and the number of shares of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the
event of a stock dividend on, or a subdivision, combination or
reclassification of the Preferred Stock, (ii) upon the grant to holders of
the Preferred Stock of certain rights or warrants to subscribe for or
purchase Preferred Stock at a price, or securities convertible into
Preferred Stock with a conversion price, less than the then-current market
price of the Preferred Stock or (iii) upon the distribution to holders of
the Preferred Stock of evidences of indebtedness or assets (excluding
regular periodic cash dividends or dividends payable in Preferred Stock) or
of subscription rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-hundredths of a
share of Preferred stock issuable upon exercise of each Right are also
subject to adjustment in the event of a stock split of the Common Stock or
a stock dividend on the Common Stock payable in shares of Common Stock or
subdivisions, consolidations or combinations of the Common Stock occurring,
in any such case, prior to the Distribution Date.
Shares of Preferred Stock purchasable upon exercise of the Rights will not
be redeemable and junior to any other series of preferred stock the Company
may issue (unless otherwise provided in the terms of such stock). Each
share of Preferred Stock will have a preferential dividend in an amount
equal to 100 times any dividend declared on each share of Common Stock. In
the event of liquidation, the holders of the Preferred Stock will receive a
preferred liquidation payment of equal to the greater of $100 and 100 times
the payment made per share of Common Stock. Each share of Preferred Stock
will have 100 votes, voting together with the Common Stock. In the event of
any merger, consolidation or other transaction in which shares of Common
Stock are converted or exchanged, each share of Preferred Stock will be
entitled to receive 100 times the amount and type of consideration received
per share of Common Stock. The rights of the Preferred Stock as to
dividends, liquidation and voting, and in the event of mergers and
consolidations, are protected by customary antidilution provisions.
Because of the nature of the Preferred Stock's dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a share of
Preferred Stock purchasable upon exercise of each Right should approximate
the value of one share of Common Stock.
If any person or group (other than the Company, any subsidiary of the
Company or any employee benefit plan of the Company) acquires 15% or more
of the Company's outstanding voting stock without the prior written consent
of the Board of Directors, each Right, except those held by such persons,
would entitle each holder of a Right to acquire such number of shares of
the Company's Common Stock as shall equal the result obtained by
multiplying the then current purchase Price by the number of one
one-hundredths of a share of Preferred Stock for which a Right is then
exercisable and dividing that product by 50% of the then current per-share
market price of Company Common Stock.
If any person or group (other than the Company, any subsidiary of the
Company or any employee benefit plan of the Company) acquires more than 15%
but less than 50% of the outstanding Company Common Stock without prior
written consent of the Board of Directors, each Right, except those held by
such persons, may be exchanged by the Board of Directors for one share of
Company Common Stock.
If the Company were acquired in a merger or other business combination
transaction where the Company is not the surviving corporation or where
Company Common Stock is exchanged or changed or 50% or more of the
Company's assets or earnings power is sold in one or several transactions
without the prior written consent of the Board of Directors, each Right
would entitle the holders thereof (except for the Acquiring Person) to
receive such number of shares of the acquiring company's common stock as
shall be equal to the result obtained by multiplying the then current
Purchase Price by the number one one-hundredths of a share of Preferred
stock for which a Right is then exercisable and dividing that product by
50% of the then current market price per share of the common stock of the
acquiring company on the date of such merger or other business combination
transaction.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1%
in such Purchase Price. No fractional shares of Preferred Stock will be
issued (other than fractions which are integral multiples of one
one-hundredth of a share of Preferred Stock, which may, at the election of
the Company, be evidenced by depositary receipts), and in lieu thereof an
adjustment in cash will be made based on the market price of the Preferred
Stock on the last trading day prior to the date of exercise.
At any time prior to the time an Acquiring Person becomes such, the Board
of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (the "Redemption Price"). The redemption
of the Rights may be made effective at such time, on such basis and with
such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of
rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including, but
not limited to, an amendment to lower certain thresholds described above to
not less than the greater of (i) any percentage greater than the largest
percentage of the voting power of all securities of the Company then known
to the Company to be beneficially owned by any person or group of
affiliated or associated persons (other than an excepted person) and (ii)
10%, except that from and after such time as any person or group of
affiliated or associated persons becomes an Acquiring Person no such
amendment may adversely affect the interests of the holders of the Rights.
Until a Right is exercised, the holder thereof as such, will have no rights
as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The form of Rights Agreement between the Company and the Rights Agent
specifying the terms of the Rights, which includes as Exhibit B thereto the
form of Right Certificate, is incorporated herein by reference as Exhibit
4(b). The foregoing description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the form of
Rights Agreement (and the exhibits thereto) attached hereto.
(c) On August 11, 1998 the Company announced the appointment of Dennis R.
Burgette to the position of President and Chief Operating Officer of
Broyhill Furniture Industries, Inc. ("Broyhill"), effective September 1,
1998. Brent Kincaid, President and Chief Executive Officer of Broyhill,
will continue as Chief Executive Officer of Broyhill until his retirement
at the end of 1998, at which time Dennis R. Burgette will assume those
duties.
Item 6. Exhibits and Reports on 8-K
(a)
4.1 Credit Agreement, dated as of November 17, 1994, as amended and
restated as of December 29, 1995; September 6, 1996; June 27,
1997; and July 14, 1998 among the Company, Broyhill Furniture
Industries, Inc., Lane Furniture Industries, Inc., Thomasville
Furniture Industries, Inc., Various Banks, Credit Lyonnais
Chicago Branch, as Documentation Agent, NationsBank, N.A., as
Syndication Agent and Bankers Trust Company, as Administrative
Agent.
4.2 Rights Agreement, dated as of July 30, 1998, between the Company
and The Bank of New York, as Rights Agent, which includes the
form of Certificate of Designations, setting forth the terms of
the Series A Junior Participating Preferred Stock, no par value
$135.00 per share, as Exhibit A, the form of Right Certificate as
Exhibit B and the Summary of Preferred Stock Purchase Rights as
Exhibit C. Pursuant to the Rights Agreement, printed Rights
Certificates will not be mailed until as soon as practicable
after the earlier of the tenth day after public announcement that
a person or group (except for certain exempted persons or groups)
has acquired beneficial ownership of 15% or more of the
outstanding shares of Common Stock or the tenth business day (or
such later date as may be determined by action of the Board of
Directors) after a person commences, or announces its intention
to commence, a tender offer or exchange offer the consummation of
which would result in the beneficial ownership by a person or
group of 15% or more of the outstanding shares of Common Stock.
(Incorporated by reference to Exhibit 1 to Furniture Brands
International, Inc.'s Registration Statement on Form 8-A, dated
July 31, 1998.)
4.3 Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock of the Company.
27.1 Financial Data Schedule for period ended June 30, 1997.
27.2 Financial Data Schedule for period ended June 30, 1998.
99. Press Release, dated July 31, 1998.
(b)
A Form 8-K was not required to be filed during the quarter ended June 30,
1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Furniture Brands International, Inc.
(Registrant)
By: /s/ Steven W. Alstadt
------------------------
Steven W. Alstadt
Controller and
Chief Accounting Officer
Date: August 12, 1998