Furniture Brands International announced its financial results for the fourth quarter and year ended December 31, 2009.
Net sales from continuing operations for the 2009 fourth quarter were $285.6 million, compared with $403.4 million in the fourth quarter of 2008, a decline of 29.2%. Results from continuing operations were a loss of $1.35 per diluted share in the 2009 quarter compared to a loss of $7.25 per diluted share for the fourth quarter of 2008.
Net sales from continuing operations for the fiscal year ended December 31, 2009 were $1.2 billion, compared with $1.7 billion for the fiscal year ended December 31, 2008, a decline of 29.8%. Results from continuing operations were a loss of $2.25 per diluted share for fiscal 2009 compared to a loss of $8.53 per diluted share for fiscal 2008. Results for all periods include selected items that are detailed in Exhibit 1 attached to this press release.
The company also announced that it expects to receive a federal tax refund of $58 million to $60 million, subject to tax return filing, during 2010 with the majority of the refund expected to be received during the first half of the year. The refund stems from the Worker, Home Ownership and Business Assistance Act of 2009 that was signed into law on November 6, 2009. The Act includes a provision that allows businesses with federal net operating losses in tax years 2008 or 2009 to carry back losses from one of those years for a period of five years. Prior to this legislation, the carry back was limited to a period of two years. This additional carry back ability resulted in a reduction of income tax valuation allowance and corresponding recognition of income tax benefit in the quarter ended December 31, 2009. The company will retain net operating loss carry forwards that may be applied to future earnings.
"Furniture Brands' financial results for 2009 show the effect of the recession on consumer spending," said Ralph P. Scozzafava, Chairman of the Board and Chief Executive Officer. "The company's results also reflect decisions to right-size the company and reduce our cost basis. These actions are good for our business in the long term and also provided an opportunity for the company to capitalize on the tax refund created by recent federal tax legislation. With our strong cash flow management, Furniture Brands' balance sheet is solid and the pending tax refund will further improve our financial position. The company's balance sheet is on track to have cash exceed debt with the receipt of the tax refund later this year," Mr. Scozzafava said.
"Liquidity and a strong balance sheet are just one component of our long-term business strategy," Mr. Scozzafava continued. "During the past year, the entire Furniture Brands organization has made great strides in positioning the company for future success. These accomplishments include:
- Increasing adjusted gross margin* by 110 basis points to 23.1%, the highest level since 2004 on an adjusted basis,
- Reducing adjusted SG&A expenses* by $90 million to $328 million, the lowest level since 1996 on an adjusted basis,
- Lowering net debt* by $72.3 million to $11.1 million, the lowest level in Furniture Brands' history,
- Improving new product development through proprietary consumer testing, and
- Implementing shared services and administrative best practices on a company-wide basis
"All of these actions required difficult decisions and challenging implementation. While these changes will provide benefits going forward, there is much more left to accomplish. Right now, our global supply chain operates under a single leadership team working diligently on increasing our quality while streamlining our costs. We are also implementing a common technology platform to reduce costs and allow faster and more informed decision-making. These structural changes will help Furniture Brands be a better performer going forward," Mr. Scozzafava said.
"With regard to top-line sales, our order trends appear to be stabilizing and the company's upholstery business is tracking with industry patterns, especially in the medium price points. Sales in our higher end brands continue to reflect a cautious attitude on the part of the luxury consumer. Furniture Brands is working hard to drive consumer demand with the development of exciting, new consumer-tested products, enhanced brand marketing to consumers, and innovative programs for our dealers. We have the best portfolio of brands in the industry, and we believe that people want to buy quality products from brands they know and trust," Mr. Scozzafava said.
Gross margin for the 2009 fourth quarter was 7.1% compared to 8.9% in the same quarter of 2008. Gross margin for the 2009 quarter reflects the company's focused efforts to accelerate the sale of slow-moving, discontinued and obsolete inventory through non-traditional channels. These efforts resulted in sales at reduced prices in the fourth quarter as well as reserve charges on similar inventory on hand at the end of 2009. These efforts generated a $33 million inventory charge during the fourth quarter of 2009.
Financial results for all periods include selected items. Excluding the selected items, adjusted gross margin for the fourth quarter of 2009 was 21.7% compared to 17.8% in the fourth quarter of 2008. For the full year, 2009 adjusted gross margin was 23.1% compared to 22.0% for 2008.
Selling, general, and administrative costs for the 2009 fourth quarter totaled $115.2 million compared to $161.3 million in the fourth quarter of 2008. Excluding selected items, adjusted SG&A costs totaled $85.5 million and $111.9 million for the fourth quarters of 2009 and 2008, respectively, for a decrease of $26.4 million.
At December 31, 2009, the company reported net debt of $11.1 million compared to net debt of $83.4 million at December 31, 2008. During the 2009 fourth quarter and fiscal year, the company generated $12.7 million and $35.6 million, respectively, in cash flow, exclusive of changes in debt balances and the impact of tax refunds.
About Furniture Brands: Furniture Brands International (NYSE:FBN - News) is a global operating company that is one of the nation's leading designers, manufacturers, and retailers of home furnishings. It markets through a wide range of retail channels, from mass merchant stores to single-brand and independent dealers to specialized interior designers. Furniture Brands serves its customers through some of the best known and most respected brands in the furniture industry, including Broyhill, Lane, Thomasville, Drexel Heritage, Henredon, Pearson, Hickory Chair, Laneventure, and Maitland-Smith.