Furniture Brands International Reports 4th Quarter Loss

Furniture World Magazine

Furniture Brands International announced its financial results for the fourth quarter and full year ended December 31, 2007. Net sales for the fourth quarter of 2007 were $504.8 million, compared with $572.8 million in the fourth quarter of 2006, a decrease of 11.9%. Net loss from continuing operations for the fourth quarter of 2007 was $41.8 million, down from $1.0 million of earnings in the same quarter of the prior year. Diluted net loss per common share from continuing operations was $0.86, compared with diluted net earnings per common share of $0.02 in the fourth quarter of last year. Cash flow from operating activities for the fourth quarter of 2007 was $49.5 million, compared with cash used of $17.2 million for the same quarter of 2006. Net sales for the full year of 2007 were $2.1 billion, compared with $2.4 billion for the full year of 2006, a decrease of 11.8%. Net loss from continuing operations for fiscal 2007 was $51.2 million, down from $49.9 million of earnings in 2006. Diluted net loss per common share from continuing operations was $1.06 for the full year of 2007 as compared with diluted net earnings per common share of $1.02 in 2006. Cash flow from operating activities for the full year of 2007 was $152.9 million as compared with cash used of $26.9 million for 2006. As previously announced, the Company intends to divest Hickory Business Furniture (``HBF''), its business furniture operation, in the first quarter of fiscal 2008. Accordingly, HBF has been reported as a discontinued operation. Net earnings from discontinued operations were $5.6 million and $5.1 million for the 12 months ended December 31, 2007 and 2006, respectively. Ralph P. Scozzafava, the company's Vice-Chairman of the Board and Chief Executive Officer, commented: ``At our Investor Conference in October we unveiled the major elements of our new strategic direction, which we are executing aggressively. These include building on the strengths of our industry-leading brands, winning with customers by delivering to their expectations, achieving operational excellence, and growing and developing our people. In pursuit of this plan we have already undertaken a number of initiatives, all designed to grow our business, to make our numbers, and to beat our competition. But, as I said in October, many of these initiatives have involved implementation costs and other effects that have negatively impacted our results in the fourth quarter and the full year 2007. "We undertook these initiatives proactively and voluntarily because they will provide the best long-term outcomes for our shareholders, customers, and associates. We have now completed a number of previously announced matters, such as closing 18 company-owned stores; closing five facilities; selected staffing reductions at our Lane, Thomasville, Drexel Heritage and Henredon businesses; and, targeted inventory reduction programs. These changes were costly in the quarter but they will improve results going forward.'' Costs associated with these strategic initiatives and other matters are included in the company's reported results. On a pre-tax basis, these costs totaled $38.0 million in the fourth quarter of 2007 and $85.0 million for the full year of 2007. A summary of these costs is included in the tables accompanying this release. Mr. Scozzafava added, "Our strategic plan was developed with a three-stage timeline: an initial focus on cash generation and balance sheet stability in 2007, followed by improvements in profitability and then a sharp focus on increasing sales. Our efforts in 2007 were successful. We paid down $10 million of our long-term debt in 2007. And, through a combination of better working-capital management, tight control of capital spending, and selected sales of non-strategic assets, our year-end 2007 cash balance totaled $138.8 million, $20 million of which was restricted and used to pay down debt in January 2008. This puts Furniture Brands with the most cash on hand and the least debt outstanding at any year-end since the company recapitalized in 1992. We'll use that strong cash position to repay another $15 million in long-term debt in mid-February, which is another example of our aggressive execution of the new strategy.'' Outlook Mr. Scozzafava continued, ``The elements of our strategic plan are being embraced throughout the organization and by our customers. We have installed several new members of the senior management team who have taken full ownership for our results under this plan. Joining the Furniture Brands Executive Leadership Team in the past year are: * Dan Bradley, President of the Designer Group * Jeff Cook, President of Broyhill * Alex Hodges, Chief Marketing Officer * Skipper Holliman, President of Lane * Mike McBreen, Vice President of Logistics and Supply Chain * Ed Teplitz, President of Thomasville "The leadership team has already begun to deliver on the key building blocks for improved operations going forward. Since our investor meeting in October, we have established Asian supply chain and logistics offices, optimized our domestic network of warehouses, streamlined IT infrastructure, and consolidated purchasing of raw materials, transportation services, and employee benefits. "In 2008 we will continue to drive toward increasing profitability through improved supply chain activities and by continuing the consolidation of corporate services. We are already seeing the positive effects of many of the cost-savings initiatives we undertook in 2007. As we progress through the year, we will see even greater benefits as we put many of the implementation costs behind us.'' Quarterly Dividend Declared The Board of Directors declared today a quarterly dividend of $0.04 per common share payable February 29, 2008 to shareholders of record at the close of business on February 11, 2008. "As part of our commitment to managing cash carefully and deploying it to strategically grow the company, the Board has approved a reduction in our quarterly dividend to $0.04 per share from $0.16 per share as we focus on delivering shareholder value through a strong execution of our strategy,'' Mr. Scozzafava said. "Our decision to reduce the dividend and reinvest available cash back into the business is consistent with our strategic plan. By adopting a dividend payout that reflects current industry conditions, we continue to return value to our shareholders while allowing us to make strategic investments in key parts of our business -- our brands, our customers, our operations, and our people. We have ample liquidity to execute the strategic plan, as well as to selectively reduce our long-term debt. Earnings Guidance "Our strategy will translate into improved financial performance. As previously announced, we have adopted a new policy regarding earnings guidance. In keeping with public company best practices, we will provide full year sales and earnings guidance at the beginning of each fiscal year and we will update or affirm this annual guidance at our regular quarterly conference calls. "With respect to revenues in fiscal year 2008, we find that current business conditions continue to be as challenging as they have been throughout the second half of 2007. We see little in the marketplace suggesting a near-term improvement in revenues on a year-over-year basis. Accordingly, and excluding the sales of HBF, we expect sales in 2008 to be in the $1.9 billion to $2.0 billion range. Nevertheless, we expect the quality of our sales and resulting margins to be better as we optimize our portfolio and we work with customers to drive profitable volume. "Because of our 2007 strategic actions on inventory levels, store closings and headcount reductions, we expect 2008 diluted net earnings per common share, on a GAAP-reported basis, to be in the $0.40 to $0.60 range. This guidance is on a continuing operations basis, excluding the results of HBF. "Our full year guidance for 2008 includes the effect of all anticipated restructuring, asset impairment and severance charges. Going forward, we do not intend to segregate these charges unless required by applicable accounting rules, although we will provide supplemental detail on these costs to assist in financial modeling. We believe this will lend itself to greater simplicity and transparency in our earnings reporting. "We continue to move forward aggressively with our strategic plan,'' Mr. Scozzafava concluded. ``At the top line, some of our commercial initiatives are already taking shape with enhanced focus on new marketing efforts and customer initiatives. On the cost side, we have begun to leverage our scale in procurement, operating expense programs, and information technology infrastructure, and we are establishing our on-the-ground supply chain organization in China. This will be a long journey, but we are firmly on our way.'' About Furniture Brands:Furniture Brands International (NYSE:FBN - News) is a vertically integrated operating company that is one of the nation's leading designers, manufacturers, and retailers of home furnishings. With annual sales of approximately $2 billion, 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.