UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
Form 10-K
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(Mark one)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31,
2009
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number
001-00091
Furniture Brands International,
Inc.
(Exact Name of registrant as
specified in its charter)
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Delaware
(State or other jurisdiction
of
incorporation or organization)
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43-0337683
(I.R.S. Employer
Identification No.)
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1 North Brentwood Blvd., St. Louis, Missouri
(Address of principal
executive offices)
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63105
(Zip Code)
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Registrants telephone number, including area code
(314) 863-1100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
ACT:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock $1.00 Stated Value
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New York Stock Exchange
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with Preferred Stock Purchase Rights
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
ACT:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. o Yes þ No
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. o Yes þ No
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 requirements for the past
90 days. þ Yes o No
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). o Yes o No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer, and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company o
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). o Yes þ No
The aggregate market value of the voting stock held by
non-affiliates of the registrant as of June 30, 2009, the
last business day of the registrants most recently
completed second fiscal quarter, was approximately $147,589,000.
Indicate the number of shares outstanding of each of the
registrants classes of common stock, as of the latest
practicable date.
48,293,607 shares
as of February 28, 2010
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement for the 2010 Annual
Meeting of Stockholders to be held on May 6, 2010 are
incorporated by reference in Part III.
FURNITURE BRANDS
INTERNATIONAL, INC.
TABLE OF
CONTENTS
Trademarks and trade names referred to in this filing include
Broyhill, Lane, Thomasville, Drexel Heritage, Henredon, Hickory
Chair, Pearson, Laneventure, and Maitland-Smith, among others.
2
PART I
Overview
We are one of the worlds leading designers, manufacturers,
sourcers, and retailers of home furnishings and were
incorporated in Delaware in 1921. We market through a wide range
of retail channels, from mass merchant stores to single-branded
and independent dealers to specialized interior designers. We
serve our customers through some of the best known and most
respected brands in the furniture industry, including Broyhill,
Lane, Thomasville, Drexel Heritage, Henredon, Hickory Chair,
Pearson, Laneventure, and Maitland-Smith.
Through these brands, we design, manufacture, source, market,
and distribute (i) case goods, consisting of bedroom,
dining room, and living room furniture, (ii) stationary
upholstery products, consisting of sofas, loveseats, sectionals,
and chairs, (iii) motion upholstered furniture, consisting
of recliners and sleep sofas, (iv) occasional furniture,
consisting of wood, metal and glass tables, accent pieces, home
entertainment centers, and home office furniture, and
(v) decorative accessories and accent pieces. Our brands
are featured in nearly every price and product category in the
residential furniture industry.
Brands and
Products
Each of our brands designs, manufactures, sources, and markets
home furnishings, targeting specific customers in relation to
style and price point.
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Broyhill has collections of mid-priced furniture, including both
wood furniture and upholstered products, in a wide range of
styles and product categories including bedroom, dining room,
living room, occasional, youth, home office, and home
entertainment.
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Lane focuses primarily on mid-priced upholstered furniture,
including motion and stationary furniture with an emphasis on
home entertainment and family rooms.
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Thomasville has both wood furniture and upholstered products in
the mid- to upper-price ranges and also manufactures and markets
promotional-priced case goods and
ready-to-assemble
furniture.
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Drexel Heritage markets both casegoods and upholstered furniture
under the brand names Heritage, Drexel, and dh, in categories
ranging from mid- to premium-priced.
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Henredon specializes in both wood furniture and upholstered
products in the premium-price category.
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Hickory Chair manufactures a premium-priced brand of wood and
upholstered furniture, offering traditional and modern styles.
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Pearson offers contemporary and traditional styles of finely
tailored upholstered furniture in the premium-price category.
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Laneventure markets a premium-priced outdoor line of wicker,
rattan, bamboo, exposed aluminum, and teak furniture.
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Maitland-Smith designs and manufactures premium hand crafted,
antique-inspired furniture, accessories, and lighting, utilizing
a wide range of unique materials. Maitland-Smith markets under
both the Maitland-Smith and LaBarge brand names.
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In 2008, we sold Hickory Business Furniture, a wholly owned
subsidiary that designs and manufactures business furniture. As
a result, this business unit has been reflected as a
discontinued operation in all periods presented in this
Form 10-K.
3
Distribution
Our breadth of product and international scope of distribution
enable us to service retailers ranging in size from small,
independently owned furniture stores to national and regional
department stores and chains. The residential furniture retail
industry has consolidated in recent years, displacing many small
local and regional furniture retailers with larger chains and
specialty stores. We believe our relative size and the strength
of our brand names offers us an important competitive advantage
in this new environment.
Our primary avenue of distribution continues to be through a
diverse network of independently owned, full-line furniture
retailers. Although a number of these retailers have been
displaced in recent years, this network remains an important
part of our distribution base.
We also have dedicated gallery programs. In this approach,
retailers employ a consistent concept where products are
displayed in complete and fully accessorized room settings
instead of as individual pieces. This presentation format
encourages consumers to purchase an entire room of furniture
instead of individual pieces from different manufacturers. Each
of our brands offer services to retailers to support their
marketing efforts, including coordinated national advertising,
merchandising and display programs, and dealer training.
We have further developed our dedicated distribution channel of
single-brand retail Thomasville Home Furnishings Stores. These
stores consist of company or dealer-owned retail locations that
feature the Thomasville brand. We believe distributing our
Thomasville products through dedicated, single-brand stores
strengthens brand awareness, provides well-informed and focused
sales personnel, and encourages the purchase of multiple items
per visit. We believe this ownership brings us closer to the
consumer, gives us greater line of sight into developing tastes
and trends in the marketplace, and helps us better understand
the challenges facing the independent retailers with whom we do
the majority of our business.
Additionally, we have developed significant relationships and
sales accounts with large national department stores and
specialty stores. This distribution channel is an increasingly
important part of our distribution base.
We also continue to explore opportunities to expand
international sales and to distribute through non-traditional
channels such as wholesale clubs, catalog retailers, and the
Internet.
Trade showrooms are located in Thomasville and High Point, North
Carolina; Chicago, Illinois; Las Vegas, Nevada; and Tupelo,
Mississippi.
Manufacturing and
Sourcing
We have a blended manufacturing strategy including a mix of
domestic production and products sourced from offshore. Our
principal domestic production operations include ten upholstery
facilities, three case goods facilities, one component
manufacturing facility, and one multifunctional facility, which
at each of we are in the process of implementing various lean
manufacturing initiatives. These principal domestic facilities
are located in North Carolina, Mississippi, and Virginia. We
also operate manufacturing facilities in the Philippines and
Indonesia. These facilities total approximately 8.4 million
square feet. For additional information on our principal
properties, see Item 2 of this
Form 10-K.
A portion of our products are being sourced from manufacturers
located offshore, primarily in China, the Philippines,
Indonesia, and Vietnam. We design and engineer these products,
and then have them manufactured to our specifications by
independent offshore manufacturers. We have informal strategic
relationships with several of the larger foreign manufacturers
whereby we have the ability to purchase, on a coordinated basis,
a significant portion of the foreign manufacturers
capacity, subject to our quality control and delivery standards.
During 2009, three of these manufacturers represented 15%, 13%,
and 11% of imported product and two other manufacturers
represented in excess of 5% each.
4
On January 1, 2009, we replaced third-party management of
our Asia sourcing operations with FBN Asia. This group of
approximately 140 company employees now has primary
responsibility for quality control, sourcing of raw materials
and finished goods, and logistics.
Raw Materials and
Suppliers
The raw materials used in manufacturing our products include
lumber, veneers, plywood, fiberboard, particleboard, steel,
paper, hardware, adhesives, finishing materials, glass, mirrored
glass, fabrics, leathers, metals, stone, synthetics and
upholstered filling material (such as synthetic fibers, foam
padding, and polyurethane cushioning). The various types of wood
used in our products include cherry, oak, maple, pine, pecan,
mahogany, alder, ash, poplar, and teak. We purchase wood,
fabrics, leathers, and other raw materials both domestically and
abroad. We believe our supply sources for these materials are
adequate and interchangeable. In addition, by consolidating our
purchasing of various raw materials and services, we have been
able to realize cost savings.
We have no long-term supply contracts and we have experienced no
significant problems in supplying our operations. Although we
have strategically selected our suppliers of raw materials, we
believe there are a number of other sources available,
contributing to our ability to obtain competitive pricing.
Prices fluctuate over time depending upon factors such as
supply, demand, and weather. Increases in prices may have a
short-term impact on our profit margins.
Marketing and
Advertising
Our brands use multiple advertising techniques to increase
consumer awareness of our brand names and motivate purchases of
our products. These techniques include advertisements targeted
to specific consumer segments through national and regional
television as well as leading home furnishing and other popular
magazines. In many instances advertising is focused in major
markets to create buying urgency around our products and
specific sale events and to provide store location information,
enabling retailers to be listed jointly in advertisements for
maximum advertising efficiency. We also seek to increase
consumer buying and strengthen relationships with retailers
through cooperative advertising and selective promotional
programs, and focus our marketing efforts on prime potential
customers utilizing consumer segmentation data and customer
comments from our websites and from each brands toll-free
telephone number. In addition, our brands have increased our
online presence through website enhancements and the increased
use of online advertising and social media to promote our
products and drive consumers to retail stores.
Management and
Employees
As of December 31, 2009, we employed approximately
6,500 full-time employees in the United States and
approximately 2,000 non-domestic employees. None of our
employees is covered by a collective bargaining agreement. We
believe our relationship with our employees is good.
Environmental
matters
We are subject to a wide range of federal, state, local, and
international laws and regulations relating to protection of the
environment, worker health and safety, and the emission,
discharge, storage, treatment, and disposal of hazardous
materials. These laws include the Clean Air Act of 1970, as
amended, the Resource Conservation and Recovery Act, the Federal
Water Pollution Control Act, and the Comprehensive
Environmental, Response, Compensation, and Liability Act.
Certain of our operations use glues and coating materials that
contain chemicals that are considered hazardous under various
environmental laws. Accordingly, we closely monitor
environmental performance at all of our facilities. We believe
we are in substantial compliance with all environmental laws. In
our opinion, our ultimate liability, if any, under all such laws
is not reasonably likely to have a material adverse effect upon
our consolidated financial position or results of operations
other than potential exposures with respect to which monitoring
or cleanup requirements may change over time.
5
Competition
The residential furniture industry is highly competitive. Our
products compete against domestic manufacturers, importers, and
foreign manufacturers entering the United States market; as well
as direct importing by retailers. Our competitors include home
furnishings manufacturers and retailers, such as:
La-Z-Boy
Incorporated; Ethan Allen Interiors Inc.; Basset Furniture
Industries Inc.; Hooker Furniture Corporation; Stanley Furniture
Company Inc., and many others. The elements of competition
include price, style, quality, service, brand, and marketing.
Backlog
The combined backlog of our operating companies as of
December 31, 2009 was approximately $162 million
compared to approximately $170 million as of
December 31, 2008. Backlog consists of orders believed to
be firm for which a customer purchase order has been received.
Since orders may be rescheduled or canceled, backlog does not
necessarily reflect future sales levels.
Trademarks and
Trade Names
We utilize trademarks and trade names extensively to promote
brand loyalty among consumers. We view such trademarks and trade
names as valuable assets and we aggressively protect our
trademarks and trade names by taking appropriate legal action
against anyone who infringes upon or misuses them.
Our primary trademarks and trade names are: Broyhill, Lane,
Thomasville, Drexel Heritage, Henredon, Hickory Chair, Pearson,
Laneventure, and Maitland-Smith.
Working
Capital
For information regarding working capital items, see
Managements Discussion and Analysis of Financial
Condition and Results of Operations, Financial
Discussion and Liquidity Liquidity, in
Part II, Item 7 of this
Form 10-K
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Internet
Access
Forms 10-K,
10-Q,
8-K, and all
amendments to those reports are available without charge through
our website as soon as reasonably practicable after being
electronically filed with, or furnished to, the Securities and
Exchange Commission. Our website can be accessed at
furniturebrands.com. Information on our website does not
constitute part of this Annual Report on
Form 10-K.
6
Executive
Officers
The following table sets forth certain information with respect
to our executive officers:
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Name
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Age
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Position Held
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Ralph P. Scozzafava
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Chairman of the Board and Chief Executive Officer
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Steven G. Rolls
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Senior Vice President and Chief Financial Officer
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Mary E. Sweetman
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Senior Vice President, Human Resources
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Jon D. Botsford
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Senior Vice President, General Counsel and Corporate Secretary
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Raymond J. Johnson
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Senior Vice President, Global Supply Chain
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Richard R. Isaak
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Controller and Chief Accounting Officer
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Jeffrey L. Cook
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President-Broyhill Furniture Industries, Inc.
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Gregory P. Roy
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President-Lane Furniture Industries, Inc.
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Edward D. Teplitz
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President-Thomasville Furniture Industries, Inc.
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Daniel R. Bradley
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President-Furniture Brands Designer Group
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Daniel J. Stone
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Vice President, Strategy and Business Development
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Ralph P. Scozzafava has served as Chairman of the Board
since May 2008 and as a director since June 2007. Since January
2008, Mr. Scozzafava has also served as Chief Executive
Officer of our company, and from June 2007 to January 2008, he
served as Vice Chairman and Chief Executive Officer- designate.
Prior to joining our company, Mr. Scozzafava was employed
at Wm. Wrigley Jr. Company since 2001, where he held several
positions, most recently, serving as Vice President- Worldwide
Commercial Operations from March 2006 to June 2007, and as Vice
President & Managing Director North
America/Pacific from January 2004 to March 2006.
Steven G. Rolls has served as our Senior Vice President
and Chief Financial Officer since April 2008. Prior to joining
our company, Mr. Rolls served as Chief Financial Officer of
Global Energy, Inc., a privately held environmental technology
company, from February 2006 to March 2008. Prior to joining
Global Energy, Mr. Rolls was employed at Convergys
Corporation since 1998, most recently as Executive Vice
President of the Customer Management Group from 2002 to February
2006.
Mary E. Sweetman has served as our Senior Vice President,
Human Resources since May 2007, after joining us as Vice
President, Human Resources in January 2006. Prior to joining us,
Ms. Sweetman was employed at Monsanto Company for more than
14 years, most recently as Vice President of Human
Resources, International from February 2005 to December 2005.
Jon D. Botsford has served as Senior Vice President,
General Counsel and Corporate Secretary of our company since
February 2008. Prior to joining us, Mr. Botsford was
employed at Steelcase, Inc. for more than 20 years, and
most recently, served as Senior Vice President, Chief Legal
Officer and Secretary from March 1999 to March 2007.
Raymond J. Johnson joined our company in February 2009 as
our Senior Vice President, Global Supply Chain. Prior to joining
our company, has was employed at Newell Rubbermaid, Inc. from
November 2002 to February 2009, most recently as President,
Global Manufacturing and Supply Chain from February 2005 to
February 2009, and Group Vice President, Manufacturing from
November 2003 to February 2005. Prior to this, Mr. Johnson
was General Manager of the General Products Division, a Business
Unit of Eaton Corporation, from 2001 to 2002, Vice President,
Engineering and Operations of True Temper Sports, Inc. from 1999
to 2001, and Vice President and General Manager of the
Diversified Products Division of Technimark, Inc. from 1998 to
1999. From 1983 to 1998, Mr. Johnson held a variety of
positions with increasing responsibility at The Black and Decker
Corporation, ending as the Vice President of North American
Manufacturing.
7
Richard R. Isaak joined our company in April 2007 and has
served as our Controller and Chief Accounting Officer since May
2007. Prior to joining our company, Mr. Isaak was employed
at Panera Bread Company since March 2003, most recently, serving
as Vice President, Controller, and Chief Accounting Officer from
August 2004 to April 2007, and as Director of Accounting and
Reporting prior to August 2004. Prior to joining Panera,
Mr. Isaak was an auditor with Ernst & Young LLP.
Jeffrey L. Cook has served as President of Broyhill
Furniture Industries, Inc., a subsidiary of our company, since
March 2007. Prior to joining Broyhill, Mr. Cook served as
President of Magnussen Home Furnishings, Inc. from December 1999
to February 2007. Prior to this, Mr. Cook has held various
positions within the furniture industry for more than
30 years.
Gregory P. Roy has served as our President of Lane
Furniture Industries, Inc., since April 2009. Mr. Roy
joined Lane in 1988 and has held positions of increasing
responsibility, and was most recently Executive Vice President
of Sales and Marketing.
Edward D. Teplitz has served as President of our
subsidiary, Thomasville Furniture Industries, Inc., since
October 2007. Prior to joining us, Mr. Teplitz served in
various positions within Ethan Allen Interiors, Inc. for six
years, most recently, as the Vice President, Retail Division,
from May 2003 to June 2007, and Executive Vice President of
Ethan Allen Retail Inc. from 2005 to June 2007. Prior to this,
Mr. Teplitz was an Ethan Allen licensee and was employed in
the corporate finance department of E.F. Hutton &
Company and FLIC (USA), Inc.
Daniel R. Bradley has served as President of our
Furniture Brands Designer Group since November 2007. Prior to
joining us, Mr. Bradley served as President and Chief
Executive Officer of Ferguson, Copeland, LTD from May 2006 to
October 2007, and as President of Baker Knapp & Tubbs
from May 2002 to May 2006. From 1989 to 2002, Mr. Bradley
held various positions with Henredon, including Vice President
General Manager Case-Goods Division.
Daniel J. Stone has served as our Vice President of
Strategy and Business Development since March 2008, after
joining us as Vice President of Financial Planning and Analysis
in January 2006. Prior to joining us, Mr. Stone held
various positions at Procter & Gamble from 1991
through 2006, most recently as Category Finance Manager,
Pringles from July 2002 to January 2006. Mr. Stone was an
officer in the U.S. Air Force.
Each executive officer serves for a one-year term ending at the
next annual meeting of the Board of Directors, subject to any
applicable employment agreement and his or her earlier death,
resignation or removal.
The risks and uncertainties described below are those that we
currently believe may materially affect our company. Additional
risks and uncertainties that we are unaware of or that we
currently deem immaterial also may become important factors that
affect our company. You should carefully consider the risks
described below in addition to all other information provided to
you in this document and our subsequent filings with the
Securities and Exchange Commission. Any of the following risks
could materially and adversely affect our business, results of
operations, and financial condition.
The continued
economic downturn could result in a decrease in our future
sales, earnings, and liquidity.
Economic conditions have deteriorated significantly in the
United States, and worldwide, and may remain depressed for the
foreseeable future. These conditions have resulted in a decline
in our sales and earnings and could continue to impact our sales
and earnings in the future. Sales of residential furniture are
impacted by downturns in the general economy primarily due to
decreased discretionary spending by consumers. The general level
of consumer spending is affected by a number of factors,
including, among others, general economic conditions, inflation,
and consumer confidence, all of which are generally beyond our
control. The economic downturn also impacts retailers, our
primary customers, potentially
8
resulting in the inability of our customers to pay amounts owed
to us. In addition, if our retail customers are unable to sell
our product or are unable to access credit, they may experience
financial difficulties leading to bankruptcies, liquidations,
and other unfavorable events. If any of these events occur, or
if unfavorable economic conditions continue to challenge the
consumer environment, our future sales, earnings, and liquidity
would likely be adversely impacted.
Depressed
market returns could have a negative impact on the return on
plan assets for our qualified pension plan, which may require
significant funding.
Financial markets have experienced extreme disruption in recent
years. As a result of this disruption in the domestic and
international equity and bond markets, the asset values of our
pension plans decreased significantly and further disruptions in
the financial markets could adversely impact the value of our
pension plan assets in the future. The projected benefit
obligation of our qualified defined benefit plan exceeded the
fair value of plan assets by $115.5 million at
December 31, 2009. In December 2008, the federal government
passed legislation that provides relief through 2010 from the
funding requirements under the Pension Protection Act of 2006.
Due to this legislation, our minimum funding requirements for
2010 are only approximately $3 million. However, if the
relief provided by the federal government is not extended or is
no longer applicable to our qualified pension plan, if there is
continued downward pressure on the asset values of the plan, if
the assets fail to recover in value, or if the present value of
the benefit obligation of the plan increases, as would occur in
the event of a decrease in the discount rate used to measure the
obligation, significantly increased funding of our plan in the
future could be required, which would negatively impact our
liquidity.
Loss of market
share and other financial or operational difficulties due to
competition would likely result in a decrease in our sales and
earnings.
The residential furniture industry is highly competitive and
fragmented. We compete with many other manufacturers and
retailers, some of which offer widely advertised, well-known,
branded products, and others are large retail furniture dealers
who offer their own store-branded products. Competition in the
residential furniture industry is based on the pricing of
products, quality of products, style of products, perceived
value, service to the customer, promotional activities, and
advertising. It is difficult for us to predict the timing and
scale of our competitors actions in these areas. The
highly competitive nature of the industry means we are
constantly subject to the risk of losing market share, which
would likely decrease our future sales and earnings. In
addition, due to competition, we may not be able to maintain or
raise the prices of our products in response to inflationary
pressures such as increasing costs. Also, due to the large
number of competitors and their wide range of product offerings,
we may not be able to differentiate our products (through
styling, finish, and other construction techniques) from those
of our competitors. These and other competitive pressures would
likely result in a decrease in our sales and earnings.
An inability
to forecast demand or respond to changes in consumer tastes and
fashion trends in a timely manner could result in a decrease in
our future sales and earnings.
Residential furniture is a highly styled product subject to
fashion trends and geographic consumer tastes that can change
rapidly. If we are unable to anticipate or respond to changes in
consumer tastes and fashion trends in a timely manner or to
otherwise forecast demand accurately, we may lose sales and have
excess inventory (both raw materials and finished goods), both
of which could result in a decrease in our earnings.
A failure to
achieve our projected mix of product sales could result in a
decrease in our future earnings.
Our products are sold at varying price points and levels of
profit. An increase in the sales of our lower profit products at
the expense of the sales of our higher profit products could
result in a decrease in our gross margin and earnings.
9
Business
failures of large dealers, a group of customers or our own
retail stores could result in a decrease in our future sales and
earnings.
Our business practice has been to extend payment terms to our
customers when selling furniture. As a result, we have a
substantial amount of receivables we manage daily. Although we
have no customers who individually represent 10% or more of our
total annual sales, the business failures of a large customer or
a group of customers could require us to record receivable
reserves, which would decrease earnings, as it has in past
periods. Receivables collection can be significantly impacted by
economic conditions. Therefore, deterioration in the economy, or
a lack of economic recovery, could cause further business
failures of our customers, which could in turn require
additional receivable reserves thereby lowering earnings. These
business failures can also cause loss of future sales. In
addition, we are either prime tenant on or guarantor of many
leases of company-brand stores operated by independent furniture
dealers. The viability of these dealer stores are also highly
influenced by economic conditions. Defaults by any of these
dealers would result in our becoming responsible for payments
under these leases. If we do not operate these stores, we are
still required to pay store occupancy costs, which results in a
reduction in our future sales and earnings.
Inventory
write-downs or write-offs could result in a decrease in our
earnings.
Our inventory is valued at the lower of cost or market. However,
future sales of inventory are dependent on economic conditions,
among other things. Weak economic and retail conditions could
cause a lowering of inventory values in order to sell our
product. For example, in 2009, we incurred charges of
$33.0 million related to product write-downs to actual or
anticipated sales values in this difficult retail environment.
Deterioration in the economy could require us to lower inventory
values further, which would lower our earnings.
Sales
distribution realignments can result in a decrease in our
near-term sales and earnings.
We continually review relationships with our customers to ensure
each meets our standards. These standards cover, among others,
credit worthiness, market penetration, sales growth, competitive
improvements, and sound, ethical business practices. If
customers do not meet our standards, we will consider
discontinuing these business relationships. If we discontinue a
relationship, there would likely be a decrease in near-term
sales and earnings.
Manufacturing
realignments and cost savings programs could result in a
decrease in our near-term earnings and liquidity.
We continually review our domestic manufacturing operations and
offshore sourcing capabilities. Effects of periodic
manufacturing realignments and cost savings programs would
likely result in a decrease in our near-term earnings and
liquidity until the expected cost reductions are achieved. Such
programs can include the consolidation and integration of
facilities, functions, systems, and procedures. Certain products
may also be shifted from domestic manufacturing to offshore
sourcing, and vice versa. These realignments have, and would
likely in the future, result in substantial costs including,
among others, severance, impairment, exit, and disposal costs.
Such actions may not be accomplished as quickly as anticipated
and the expected cost reductions may not be achieved in full,
both of which have, and could in the future, result in a
decrease in our near-term earnings and liquidity.
Reliance on
offshore sourcing of our products subjects us to changes in
local government regulations and currency fluctuations which
could result in a decrease in our earnings.
We have offshore capabilities that provide flexibility in
product programs and pricing to meet competitive pressures.
Risks inherent in conducting business internationally include,
among others, fluctuations in foreign-currency exchange rates,
changes in local government regulations and policies, including
those related to duties, tariffs, and trade barriers,
investments, taxation, exchange controls, repatriation of
10
earnings, and changes in local political or economic conditions,
all of which could increase our costs and decrease our earnings.
Our operations
depend on production facilities located outside the United
States which are subject to increased risks of disrupted
production which could cause delays in shipments, loss of
customers, and decreases in sales and earnings.
We have placed production in emerging markets to capitalize on
market opportunities and to minimize our costs. Our
international production operations could be disrupted by a
natural disaster, labor strike, war, political unrest, terrorist
activity, or public health concerns, particularly in emerging
countries that are not well-equipped to handle such occurrences.
Our production abroad may also be more susceptible to changes in
laws and policies in host countries and economic and political
upheaval than our domestic production. Any such disruption could
cause delays in shipments of products, loss of customers, and
decreases in sales and earnings.
Fluctuations
in the price, availability, and quality of raw materials could
cause delays in production and could increase the costs of
materials which could result in a decrease in our sales and
earnings.
We use various types of wood, fabrics, leathers, glass,
upholstered filling material, steel, and other raw materials in
manufacturing furniture. Fluctuations in the price,
availability, and quality of the raw materials we use in
manufacturing residential furniture could have a negative effect
on our cost of sales and our ability to meet the demands of our
customers. Inability to meet the demands of our customers could
result in the loss of future sales. In addition, the costs to
manufacture furniture depend in part on the market prices of the
raw materials used to produce the furniture. We may not be able
to pass along to our customers all or a portion of our higher
costs of raw materials due to competitive and marketing
pressures, which could decrease our earnings.
We are subject
to litigation, environmental regulations, and governmental
matters that could adversely impact our sales, earnings, and
liquidity.
We are, and may in the future be, a party to legal proceedings
and claims, including, but not limited to, those involving
product liability, business matters, and environmental matters,
some of which claim significant damages. We face the business
risk of exposure to product liability claims in the event that
the use of any of our products results in personal injury or
property damage. In the event any of our products prove to be
defective, we may be required to recall or redesign such
products. We maintain insurance against product liability
claims, but there can be no assurance such coverage will
continue to be available on terms acceptable to us or such
coverage will be adequate to cover exposures. We also are, and
may in the future be, a party to legal proceedings and claims
arising out of certain customer or dealer terminations as we
continue to re-examine and realign our retail distribution
strategy. Given the inherent uncertainty of litigation, these
matters could have a material adverse impact on our sales,
earnings, and liquidity. We are also subject to various laws and
regulations relating to environmental protection and we could
incur substantial costs as a result of the noncompliance with or
liability for cleanup or other costs or damages under
environmental laws. In addition, our defined benefit plans are
subject to certain pension obligations, regulations, and funding
requirements, which could cause us to incur substantial costs
and require substantial funding. All of these matters could
cause a decrease in our sales, earnings, and liquidity.
We may not
realize the anticipated benefits of mergers, acquisitions, or
dispositions.
As part of our business strategy, we may merge with or acquire
businesses and divest assets and operations. Risks commonly
encountered in mergers and acquisitions include the possibility
that we pay more than the acquired company or assets are worth,
the difficulty of assimilating the operations and personnel of
the acquired business, the potential disruption of our ongoing
business, and the distraction of
11
our management from ongoing business. Consideration paid for
future acquisitions could be in the form of cash or stock or a
combination thereof, which could result in dilution to existing
stockholders and to earnings per share. We may also evaluate the
potential disposition of assets and operations that may no
longer help us meet our objectives. When we decide to sell
assets or operations, we may encounter difficulty in finding
buyers or alternate exit strategies on acceptable terms in a
timely manner, In addition, we may dispose of assets at a price
or on terms that are less than we had anticipated.
Loss of key
personnel or the inability to hire qualified personnel could
adversely affect our business.
Our success depends, in part, on our ability to retain our key
personnel, including our executive officers and senior
management team. The unexpected loss of one or more of our key
employees could adversely affect our business. Our success also
depends, in part, on our continuing ability to identify, hire,
train, and retain highly qualified personnel. Competition for
employees can be intense. We may not be able to attract or
retain qualified personnel in the future, and our failure to do
so could adversely affect our business.
Impairment of
our trade name intangible assets would result in a decrease in
our earnings and net worth.
Our trade names are tested for impairment annually or whenever
events or changes in business circumstances indicate the
carrying value of the assets may not be recoverable. Trade names
are tested by comparing the carrying value and fair value of
each trade name to determine the amount, if any, of impairment.
The fair value of our trade names is estimated using a
relief from royalty payments methodology, which is
highly contingent upon assumed sales trends and projections,
royalty rates, and a discount rate. Lower sales trends,
decreases in projected net sales, decreases in royalty rates, or
increases in the discount rate would cause impairment charges
and a corresponding reduction in our earnings and net worth. For
example, in the fourth quarter of 2009, we tested our trade
names for impairment under this methodology and recorded an
impairment charge of $39.1 million, driven primarily by an
increase in discount rate, resulting in a remaining trade name
balance of $87.6 million at December 31, 2009.
Provisions in
our certificate of incorporation and our shareholders
rights plan could discourage a takeover and could result in a
decrease in a potential acquirers valuation of our common
stock.
Certain provisions of our certificate of incorporation and
shareholders rights plan could make it more difficult for
a third party to acquire control of us, even if such change in
control would be beneficial to our stockholders. One provision
in our certificate of incorporation allows us to issue stock
without stockholder approval. Such issuances could make it more
difficult for a third party to acquire us.
A change in
control could limit the use of our net operating loss carry
forwards and decrease a potential acquirers valuation of
our businesses, both of which could decrease our liquidity and
earnings.
If a change in control occurs pursuant to applicable statutory
regulations, we are potentially subject to limitations on the
use of our net operating loss carry forwards which in turn could
adversely impact our future liquidity and profitability. A
change in control could also decrease a potential
acquirers valuation of our businesses and discourage a
potential acquirer from purchasing our businesses.
If we and our
dealers are not able to open new stores or effectively manage
the growth of these stores, our ability to grow sales and
profitability could be adversely affected.
We have in the past and may continue in the future to open new
stores or purchase or otherwise assume operation of branded
stores from independent dealers. Increased demands on our
operational,
12
managerial, and administrative resources could cause us to
operate our business, including our existing and new stores,
less effectively, which in turn could cause deterioration in our
profitability. If we and our dealers are not able to identify
and open new stores in desirable locations and operate stores
profitably, it could adversely impact our ability to grow sales
and profitability.
We may not be
able to comply with our debt agreement or secure additional
financing on favorable terms to meet our future capital needs,
which could significantly adversely impact our liquidity and our
business.
At December 31, 2009, we had $83.9 million of cash and
cash equivalents, $95.0 million of debt outstanding, and
excess availability to borrow up to an additional
$16.9 million subject to certain provisions, including
those provisions described in Note 8 Long-Term
Debt in Part II, Item 8 of this
Form 10-K.
The breach of any of these provisions could result in a default
under our asset-based loan (ABL) and could trigger
acceleration of repayment, which would have a significant
adverse impact to our liquidity and our business. In addition,
further deterioration in the economy and our results could cause
us to not be in compliance with our ABL agreement. While we
would attempt to obtain waivers for noncompliance, we may not be
able to obtain waivers, which could have a significant adverse
impact on our liquidity and our business.
If we do not have sufficient cash reserves, cash flow from our
operations, or our borrowing capacity under our ABL is
insufficient, we may need to raise additional funds through
equity or debt financings in the future in order to meet our
operating and capital needs. Nevertheless, we may not be able to
secure adequate debt or equity financing on favorable terms, or
at all, at the time when we need such funding. In the event that
we are unable to raise additional funds, our liquidity will be
adversely impacted and our business could suffer. If we are able
to secure additional financing, these funds could be costly to
secure and maintain, which could significantly impact our
earnings and our liquidity. Also, if we raise additional funds
or settle liabilities through issuances of equity or convertible
securities, our existing stockholders could suffer significant
dilution in their percentage ownership of our company, and any
new equity securities we issue could have rights, preferences
and privileges senior to those of holders of our common stock.
In addition, any debt financing that we may secure in the future
could have restrictive covenants relating to our capital raising
activities and other financial and operational matters, which
may make it more difficult for us to obtain additional capital
and to pursue business opportunities, including potential
acquisitions.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
13
We own or lease the following principal plants, offices, and
distribution centers:
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|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
Lease
|
|
|
|
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Floor Space
|
|
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Owned
|
|
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Expiration
|
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Location
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|
Type of Facility
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|
(Sq. ft.)
|
|
|
or Leased
|
|
|
Date
|
|
|
St. Louis, MO
|
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Headquarters
|
|
|
53,467
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|
|
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Leased
|
|
|
|
2019
|
|
Saltillo, MS
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Upholstery plant/distribution center
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|
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830,200
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|
|
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Owned
|
|
|
|
|
|
Tupelo, MS
|
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Upholstery plant/distribution center
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|
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715,951
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|
|
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Owned
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|
|
|
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Conover, NC
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Upholstery plant/distribution center
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347,500
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Owned
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|
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High Point, NC
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Upholstery plant/distribution center
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178,500
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Owned
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|
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Conover, NC
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Upholstery plant
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192,015
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|
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Owned
|
|
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|
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Conover, NC
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Upholstery plant
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123,200
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Owned
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Mt. Airy, NC
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Upholstery plant
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102,500
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Owned
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Lenoir, NC
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Upholstery plant
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395,000
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|
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Owned
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|
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Longview, NC
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Upholstery plant
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|
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334,000
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|
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Leased
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2015
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Hickory, NC
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Upholstery plant/distribution center
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209,800
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Leased
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2010
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Appomattox, VA
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Case goods plant/distribution center
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829,800
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Owned
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Lenoir, NC
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Case goods plant/distribution center
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828,000
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Owned
|
|
|
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Thomasville, NC
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Case goods plant
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325,000
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|
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Owned
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|
|
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Hickory, NC
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Case goods plant/upholstery plant/distribution center
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519,011
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Owned
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High Point, NC
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Component plant
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187,162
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Owned
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Rutherfordton, NC
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Distribution center
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1,009,253
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Owned
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Thomasville, NC
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Distribution center
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731,000
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Owned
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Morganton, NC
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Distribution center
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513,800
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Owned
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Rialto, CA
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Distribution center
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703,176
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Leased
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2012
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|
Lenoir, NC
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Distribution center
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502,420
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|
|
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Leased
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|
|
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2013
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|
Wren, MS
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Distribution center
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|
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494,813
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|
|
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Leased
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|
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2012
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Lenoir, NC
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Distribution center
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|
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205,964
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|
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Leased
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2021
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Verona, MS
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Distribution center/offices
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423,392
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Owned
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Thomasville, NC
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Offices/showroom
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256,000
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|
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Owned
|
|
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High Point, NC
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Offices/showroom
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100,000
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|
|
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Owned
|
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Lenoir, NC
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Offices
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136,000
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|
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Owned
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Cebu, Philippines
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Case goods plant
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480,338
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Leased
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2038
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Tambak Aji, Indonesia
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Case goods plant/distribution center
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1,485,419
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Owned
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Semarang, Indonesia
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Case goods plant/distribution center
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330,000
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|
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Owned
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Dongguan, China
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Offices
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159,000
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Leased
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2011
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We believe our properties are generally well-maintained,
suitable for our present operations and adequate for current
production requirements. Production capacity and extent of
utilization of our facilities
14
are difficult to quantify with certainty because maximum
capacity and utilization varies periodically in any one facility
depending upon the product being manufactured, the degree of
automation and the utilization of the labor force in the
facility. In this context, we estimate the overall production
capacity, in conjunction with our import capabilities, is
sufficient to meet anticipated demand.
We have been executing plans to reduce and consolidate our
domestic manufacturing capacity. This restructuring activity
included the closing of two manufacturing facilities and seven
retail stores in 2009, the closing of three manufacturing
facilities and nine retail stores in 2008, and the closing of
five manufacturing facilities and 18 retail stores in 2007.
We own properties in addition to the above principal facilities,
some of which are held for sale. As of December 31, 2009,
properties held for sale had a net book value of
$9.7 million. These properties are summarized below.
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Floor Space
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Location
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|
Property Description
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|
(sq. ft.)
|
|
|
Morganton, NC
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Manufacturing Facility
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874,506
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Morganton, NC
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Manufacturing Facility
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150,000
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Ponotoc, MS
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Manufacturing Facility
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369,899
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Lenoir, NC
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Manufacturing Facility
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268,172
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Conover, NC
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Manufacturing Facility
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159,000
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Lenoir, NC
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Truck Maintenance Facility
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96,000
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Allentown, PA
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Warehouse
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105,000
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Lenoir, NC
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Sample Shop and Research Facility
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56,250
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We lease retail stores in addition to the above principal
facilities, some of which are closed locations. We incur costs
associated with these closed retail stores, including recurring
occupancy costs, early contract termination settlements for
leased properties, and closed store lease liabilities
representing the present value of the remaining lease rentals
reduced by the current market rate for sublease rentals of
similar properties. The liability for closed store lease costs
is reviewed quarterly and adjusted, as necessary, to reflect
changes in estimated sublease rentals. We estimate that lease
and occupancy expense for our closed retail stores at
December 31, 2009 will be approximately $8.0 to
$10.0 million in 2010.
|
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Item 3.
|
Legal
Proceedings
|
In April 2009, a shareholder derivative suit was filed in the
Circuit Court of St. Louis County, Missouri against
Furniture Brands International, Inc. (as a nominal defendant)
and against current directors and certain current and former
officers of the company. The complaint alleges corporate waste
and a breach of fiduciary duty by the directors with respect to
the approval of certain compensation payments made to executive
officers of the company. The complaint also alleges unjust
enrichment claims against certain executive officers. The
complaint seeks, among other things, unspecified damages based
on the purported breach of fiduciary duties and the return of
certain compensation paid to certain executive officers. In May
2009, a second similar shareholder derivative suit was filed in
the Circuit Court of the City of St. Louis, Missouri
against Furniture Brands International, Inc. (as nominal
defendant) and against current and former directors and
executive officers of the company alleging breaches of fiduciary
duties and seeking damages similar to those set forth in the
first complaint. This second complaint was subsequently moved to
the Circuit Court of St. Louis County, Missouri.
On February 18, 2010, the parties entered into a
Stipulation of Settlement settling all claims asserted in the
derivative actions. The settlement provides for, among other
things, a dismissal with prejudice of the lawsuit, releases of
the defendants, the adoption of certain corporate governance
enhancements, and a $2.4 million attorney fee award, which
but for our immaterial remaining deductible, will be payable by
our insurer to plaintiffs counsel. The settlement further
provides that defendants deny any liability or responsibility
for the claims made and make no admission of any wrongdoing. The
agreed upon settlement is subject to certain conditions
including preliminary and final Court approval of the settlement.
15
We are also involved, from time to time, in litigation and other
legal proceedings incidental to our business. Management
believes that the outcome of current litigation and legal
proceedings will not have a material adverse effect upon our
results of operations or financial condition. However,
managements assessment of our current litigation and other
legal proceedings could change in light of the discovery of
facts with respect to legal actions or other proceedings pending
against us not presently known to us or determinations by
judges, juries or other finders of fact which are not in
accordance with managements evaluation of the probable
liability or outcome of such litigation or proceedings.
In addition, we are involved in various claims relating to
environmental matters at a number of current and former plant
sites. We engage or participate in remedial and other
environmental compliance activities at certain of these sites.
At other sites, we have been named as a potentially responsible
party under federal and state environmental laws for site
remediation. Management analyzes each individual site,
considering the number of parties involved, the level of our
potential liability or contribution relative to the other
parties, the nature and magnitude of the hazardous wastes
involved, the method and extent of remediation, the potential
insurance coverage, the estimated legal and consulting expense
with respect to each site and the time period over which any
costs would likely be incurred. Based on the above analysis,
management believes at the present time that any claims,
penalties or costs incurred in connection with known
environmental matters will not reasonably likely have a material
adverse effect upon our consolidated financial position or
results of operations. However, managements assessment of
our current claims could change in light of the discovery of
facts with respect to environmental sites, which are not in
accordance with managements evaluation of the probable
liability or outcome of such claims.
PART II
|
|
Item 5.
|
Market
For Registrants Common Equity, Related Stockholder
Matters, and Issuer Purchases of Equity
Securities
|
Shares of our common stock are traded on the New York Stock
Exchange. The reported high and low sale prices for our common
stock on the New York Stock Exchange are included in
Note 23 Quarterly Financial Information
(Unaudited) in Part II, Item 8 of this
Form 10-K
and are incorporated herein by reference.
Holders
As of January 31, 2010, there were approximately 1,200
holders of record of common stock. A substantially greater
number of holders of our common stock are street
name or beneficial holders, whose shares are held of
record by banks, brokers, and other financial institutions.
Dividends
We paid dividends at the rate of $0.04 per share per quarter
during the first three quarters of 2008 for a total of
$5.8 million for the year. On October 31, 2008, our
Board of Directors suspended payments of quarterly dividends
indefinitely.
Our asset-based loan contains restrictions on dividend payments
if the excess availability falls below certain thresholds. The
decision to suspend quarterly dividends did not result from
these restrictions as our excess availability was not below
these thresholds in 2008. For additional information concerning
dividends see the Consolidated Statement of Cash
Flows, Consolidated Statement of Shareholders
Equity and Comprehensive Income (Loss), and Note 23,
Quarterly Financial Information (Unaudited) in
Part II, Item 8 of this
Form 10-K.
For information relating to securities authorized for issuance
under equity compensation plans, see Part III, Item 12
of this
Form 10-K.
16
Performance
Graph
The following graph shows the cumulative total stockholder
returns (assuming reinvestment of dividends) following assumed
investment of $100 in shares of Common Stock that were
outstanding on December 31, 2004. The indices shown below
are included for comparative purposes only and do not
necessarily reflect our opinion that such indices are an
appropriate measure of the relative performance of the Common
Stock.
COMPARISON OF 5
YEAR CUMULATIVE TOTAL RETURN*
Among Furniture Brands International, Inc., The S&P 500
Index
And The Dow Jones US Furnishings Index
* $100 invested on 12/31/04 in
stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright©
2010 S&P, a division of The McGraw-Hill Companies Inc. All
rights reserved.
Copyright©
2010 Dow Jones & Co. All rights reserved.
|
|
2)
|
Repurchase of
Equity Securities
|
There were no purchases by us during the quarter ended
December 31, 2009 of equity securities that are registered
under section 12 of the Securities Exchange Act of 1934, as
amended.
17
|
|
Item 6.
|
Selected
Financial Data
|
FIVE-YEAR
CONSOLIDATED FINANCIAL REVIEW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in thousands except per share data)
|
|
|
Summary of operations(1)(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,224,370
|
|
|
$
|
1,743,176
|
|
|
$
|
2,082,056
|
|
|
$
|
2,361,680
|
|
|
$
|
2,342,526
|
|
Gross profit
|
|
|
230,000
|
|
|
|
314,535
|
|
|
|
416,095
|
|
|
|
507,875
|
|
|
|
523,088
|
|
Interest expense
|
|
|
5,342
|
|
|
|
12,510
|
|
|
|
37,388
|
|
|
|
17,665
|
|
|
|
11,877
|
|
Earnings (loss) from continuing operations before income tax
expense (benefit)
|
|
|
(176,479
|
)
|
|
|
(418,958
|
)
|
|
|
(80,478
|
)
|
|
|
72,699
|
|
|
|
86,804
|
|
Income tax expense (benefit)
|
|
|
(67,793
|
)
|
|
|
(3,157
|
)
|
|
|
(29,261
|
)
|
|
|
22,784
|
|
|
|
28,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) from continuing operations
|
|
|
(108,686
|
)
|
|
|
(415,801
|
)
|
|
|
(51,217
|
)
|
|
|
49,915
|
|
|
|
58,023
|
|
Net earnings from discontinued operations
|
|
|
|
|
|
|
29,920
|
|
|
|
5,568
|
|
|
|
5,140
|
|
|
|
3,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(108,686
|
)
|
|
$
|
(385,881
|
)
|
|
$
|
(45,649
|
)
|
|
$
|
55,055
|
|
|
$
|
61,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(2.25
|
)
|
|
$
|
(8.53
|
)
|
|
$
|
(1.06
|
)
|
|
$
|
1.02
|
|
|
$
|
1.11
|
|
Discontinued operations
|
|
|
|
|
|
|
0.61
|
|
|
|
0.12
|
|
|
$
|
0.11
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(2.25
|
)
|
|
$
|
(7.92
|
)
|
|
$
|
(0.94
|
)
|
|
$
|
1.13
|
|
|
$
|
1.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
$
|
|
|
|
$
|
0.12
|
|
|
$
|
0.64
|
|
|
$
|
0.64
|
|
|
$
|
0.60
|
|
Weighted average common shares diluted (in thousands)
|
|
|
48,302
|
|
|
|
48,739
|
|
|
|
48,446
|
|
|
|
48,753
|
|
|
|
52,104
|
|
Other information(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
326,952
|
|
|
$
|
458,376
|
|
|
$
|
712,455
|
|
|
$
|
752,618
|
|
|
$
|
718,183
|
|
Property, plant, and equipment, net
|
|
|
134,352
|
|
|
|
150,864
|
|
|
|
178,564
|
|
|
|
221,398
|
|
|
|
250,817
|
|
Capital expenditures
|
|
|
9,777
|
|
|
|
18,977
|
|
|
|
14,374
|
|
|
|
24,713
|
|
|
|
28,541
|
|
Total assets
|
|
|
758,105
|
|
|
|
999,518
|
|
|
|
1,463,078
|
|
|
|
1,558,203
|
|
|
|
1,582,224
|
|
Long-term debt
|
|
|
78,000
|
|
|
|
160,000
|
|
|
|
280,000
|
|
|
|
300,800
|
|
|
|
301,600
|
|
Shareholders equity
|
|
$
|
262,791
|
|
|
$
|
366,494
|
|
|
$
|
844,766
|
|
|
$
|
910,715
|
|
|
$
|
903,952
|
|
|
|
|
(1) |
|
The companys fiscal year ends on December 31. The
subsidiaries included in the consolidated financial statements
report their results of operations as of the Saturday closest to
December 31. Accordingly, the results of operations of our
subsidiaries periodically include a 53-week fiscal year. Fiscal
year 2008 was a 53-week fiscal year for our subsidiaries. |
|
(2) |
|
Results of operations for all periods presented have been
restated to reflect the classification of Hickory Business
Furniture (HBF) as a discontinued operation. HBF was
sold in the first quarter of 2008. |
18
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward-Looking
Statements
Our Managements Discussion and Analysis of Financial
Condition and Results of Operation (MD&A) is
provided in addition to the accompanying consolidated financial
statements and notes to assist readers in understanding our
results of operations, financial condition, and cash flows. The
various sections of this MD&A contain a number of
forward-looking statements. Words such as expects,
goals, plans, believes,
continues, may, and variations of such
words and similar expressions are intended to identify such
forward-looking statements. In addition, any statements that
refer to projections of our future financial performance, our
anticipated growth and trends in our businesses, and other
characterizations of future events or circumstances are
forward-looking statements. Such statements are based on our
current expectations and could be affected by the uncertainties
and risk factors described throughout this filing and
particularly in the Risk Factors in Part I,
Item 1A of this
Form 10-K.
Overview
We are one of the worlds leading designers, manufacturers,
sourcers, and retailers of home furnishings. We market through a
wide range of retail channels, from mass merchant stores to
single-branded and independent dealers to specialized interior
designers. We serve our customers through some of the best known
and most respected brands in the furniture industry, including
Broyhill, Lane, Thomasville, Drexel Heritage, Henredon, Hickory
Chair, Pearson, Laneventure, and Maitland-Smith.
Through these brands, we design, manufacture, source, market,
and distribute (i) case goods, consisting of bedroom,
dining room, and living room furniture, (ii) stationary
upholstery products, consisting of sofas, loveseats, sectionals,
and chairs, (iii) motion upholstered furniture, consisting
of recliners and sleep sofas, (iv) occasional furniture,
consisting of wood, metal and glass tables, accent pieces, home
entertainment centers, and home office furniture, and
(v) decorative accessories and accent pieces. Our brands
are featured in nearly every price and product category in the
residential furniture industry.
In the first quarter of 2008, we sold Hickory Business
Furniture, a wholly owned subsidiary that designs and
manufactures business furniture. As a result, this business unit
has been reflected as a discontinued operation in all periods
presented in this
Form 10-K.
Business Trends
and Strategy
We experienced declining sales from 2008 through the second
quarter of 2009, which then stabilized and remained relatively
flat from the second quarter through the fourth quarter of 2009.
We believe sales continue to be depressed primarily due to
wavering consumer confidence and a number of ongoing factors in
the global economy that have negatively impacted consumers
discretionary spending. These ongoing factors include lower home
values, prolonged foreclosure activity throughout the country,
continued high levels of unemployment, and reduced access to
consumer credit. These factors are outside of our control, but
have a direct impact on our sales due to resulting weak levels
of consumer confidence and reduced consumer spending.
In order to offset the impact of these economic conditions, we
took several significant steps and continue to take actions to
reduce costs and preserve cash. In 2009, we experienced benefits
from these measures including increased gross profit as a
percentage of sales, decreased selling, general, and
administrative expenses, and reduced debt.
The more significant actions taken by us in 2008 included
closing three domestic manufacturing facilities, reducing our
domestic workforce by approximately 1,400 employees and
consolidating our
19
administrative and support functions. Through this prolonged
economic downturn, we continue to focus on reducing our costs
and preserving cash. In 2009, we continued these types of
initiatives including consolidating and reconfiguring
manufacturing facilities and processes to eliminate waste and
improve efficiency, reducing our workforce, managing product
inventory levels better to reflect consumer demand, transforming
our transportation methods to be more cost effective, exiting
unprofitable retail locations, limiting our credit exposure to
weak retail partners, and discontinuing unprofitable licensing
arrangements. As a result of these initiatives to counteract
this environment, the following charges and costs are included
in our results of operations:
|
|
|
|
|
We incurred costs of $11.3 million in 2009, reduced from
$21.4 million in 2008, related to downtime in our factories.
|
|
|
|
We incurred expense of $16.0 million in 2009, reduced from
$39.9 million in 2008, which related primarily to occupancy
costs, lease termination costs, and lease liabilities of retail
stores that we ultimately closed.
|
|
|
|
We incurred charges of $3.6 million in 2009, reduced from
$35.2 million in 2008, related to accounts receivable.
|
|
|
|
We incurred charges of $33.0 million in 2009 and
$39.8 million in 2008 to reduce the carrying value of
inventory to market value, which was primarily driven by our
efforts to accelerate the sale of slow-moving inventory.
|
|
|
|
We incurred charges of $9.1 million in 2009 and
$13.1 million in 2008 related to severance actions, which
in 2009 related to reductions of approximately
900 employees. These reductions related to direct labor
employees and indirect support employees in our manufacturing
facilities and employees in our administrative offices.
|
|
|
|
We incurred costs and charges of $3.2 million in 2009,
reduced from $16.6 million in 2008, associated with
facility closures and related impairment charges on idle
facilities.
|
We also incurred charges of $39.1 million in 2009 and
$202.0 million in 2008 related to impairment of our
intangible assets. The 2009 charge was primarily driven by
increases in the discount rate used to value our trade names. In
2009, we recorded adjustments to correct immaterial errors from
prior periods that increased selling, general and administrative
expenses by $11.8 million. For additional information
regarding these adjustments, refer to Note 22
Correction of Immaterial Errors in Part II,
Item 8 of this
Form 10-K.
In 2008, we recorded a valuation allowance on our deferred tax
assets of $156.6 million, of which $118.0 million was
charged to income tax expense. In 2009, we recorded income tax
benefit of $67.8 million, $58.4 million of which
resulted from our ability to carry back 2009 losses for a period
of five years under the provisions of the Worker, Home Ownership
and Business Assistance Act of 2009 which was signed into law on
November 6, 2009.
These charges, costs, and benefits contributed to our net loss
from continuing operations of $108.7 million in 2009 and
$415.8 million in 2008.
In addition to the cost savings measures discussed above, we
continue to focus on leveraging the power of our brands through
innovative sales and marketing initiatives to increase our
market share and to offset the impact of the economic downturn.
These initiatives include:
|
|
|
|
|
Increasing our online presence to help drive more consumer
interest in our products and create more demand for our retail
partners.
|
|
|
|
Offering products that are differentiated from our competition
through pre-launch testing that helps predict end-market
acceptance.
|
|
|
|
Conducting consumer segmentation analysis to assist retailers in
allocating marketing resources.
|
|
|
|
Growing a global supply chain that minimizes dealer inventory
requirements.
|
20
|
|
|
|
|
Improving product development and managing product inventory
levels better to reflect consumer demand.
|
While we believe that these sales and marketing initiatives will
positively impact our sales and particularly benefit our sales
performance when economic conditions improve, we remain cautious
about future sales as we cannot predict how long the economy and
consumer retail environment will remain weak.
Results of
Operations
As an aid to understanding our results of operations on a
comparative basis, the following table has been prepared to set
forth certain statement of operations and other data for
continuing operations for 2009, 2008, and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
Net
|
|
|
|
|
|
Net
|
|
|
|
Dollars
|
|
|
Sales
|
|
|
Dollars
|
|
|
Sales
|
|
|
Dollars
|
|
|
Sales
|
|
|
|
(Dollars in millions)
|
|
|
Net sales
|
|
$
|
1,224.4
|
|
|
|
100.0
|
%
|
|
$
|
1,743.2
|
|
|
|
100.0
|
%
|
|
$
|
2,082.1
|
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
994.4
|
|
|
|
81.2
|
|
|
|
1,428.7
|
|
|
|
82.0
|
|
|
|
1,666.0
|
|
|
|
80.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
230.0
|
|
|
|
18.8
|
|
|
|
314.5
|
|
|
|
18.0
|
|
|
|
416.1
|
|
|
|
20.0
|
|
Selling, general, and administrative expenses
|
|
|
363.6
|
|
|
|
29.7
|
|
|
|
524.4
|
|
|
|
30.1
|
|
|
|
462.3
|
|
|
|
22.2
|
|
Impairment of goodwill
|
|
|
|
|
|
|
|
|
|
|
166.7
|
|
|
|
9.6
|
|
|
|
|
|
|
|
|
|
Impairment of trade names
|
|
|
39.1
|
|
|
|
3.2
|
|
|
|
35.3
|
|
|
|
2.0
|
|
|
|
7.1
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(172.7
|
)
|
|
|
(14.1
|
)
|
|
|
(411.9
|
)
|
|
|
(23.6
|
)
|
|
|
(53.3
|
)
|
|
|
(2.6
|
)
|
Interest expense
|
|
|
5.3
|
|
|
|
0.4
|
|
|
|
12.5
|
|
|
|
0.7
|
|
|
|
37.4
|
|
|
|
1.8
|
|
Other income, net
|
|
|
1.5
|
|
|
|
0.1
|
|
|
|
5.4
|
|
|
|
0.3
|
|
|
|
10.2
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income tax benefit
|
|
|
(176.5
|
)
|
|
|
(14.4
|
)
|
|
|
(419.0
|
)
|
|
|
(24.0
|
)
|
|
|
(80.5
|
)
|
|
|
(3.9
|
)
|
Income tax benefit
|
|
|
(67.8
|
)
|
|
|
(5.5
|
)
|
|
|
(3.2
|
)
|
|
|
(0.2
|
)
|
|
|
(29.3
|
)
|
|
|
(1.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
$
|
(108.7
|
)
|
|
|
(8.9
|
)%
|
|
$
|
(415.8
|
)
|
|
|
(23.8
|
)%
|
|
$
|
(51.2
|
)
|
|
|
(2.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
$
|
(2.25
|
)
|
|
|
|
|
|
$
|
(8.53
|
)
|
|
|
|
|
|
$
|
(1.06
|
)
|
|
|
|
|
Year Ended
December 31, 2009 Compared to Year Ended December 31,
2008
Net sales for 2009 were $1,224.4 million compared to
$1,743.2 million in 2008, a decrease of
$518.8 million, or 29.8%. The decrease in net sales was
primarily the result of weak retail conditions and decisions to
abandon unprofitable products, customers, and programs,
resulting in lower sales volume, and was also driven by higher
price discounts reflecting our efforts to accelerate the sale of
slow-moving inventory at year end.
Gross profit for 2009 was $230.0 million compared to
$314.5 million in 2008. The decline in gross profit is
primarily due to the lower sales volume and also attributable to
increased price discounts proportionate to sales, partially
offset by reductions in product write downs. While gross profit
decreased, gross margin improved from 18.0% in 2008 to 18.8% in
2009 primarily due to lower product write downs in 2009 as
compared to 2008.
Selling, general, and administrative expenses decreased to
$363.6 million in 2009 from $524.4 million in 2008. As
a percentage of net sales, selling, general, and administrative
expenses decreased to 29.7% in
21
2009 from 30.1% in 2008. The decrease in selling, general, and
administrative expenses was primarily due to lower compensation
and incentive plan costs, bad debt expenses, advertising
expenses, and professional fees.
Impairment of intangible assets decreased to $39.1 million
from $202.0 million in 2008. In 2009, we tested our trade
names for impairment and recorded an impairment charge of
$39.1 million, driven primarily by an increase in the
discount rate used in our valuation. In 2008, we recorded a
charge of $166.7 million to write off all goodwill and a
charge of $35.3 million for the partial write down of
certain trade names.
Interest expense for 2009 totaled $5.3 million compared to
$12.5 million in 2008. The decrease in interest expense
resulted from a reduction in outstanding debt and lower interest
rates.
Other income, net consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Interest income
|
|
$
|
1.9
|
|
|
$
|
2.8
|
|
Other
|
|
|
(0.4
|
)
|
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.5
|
|
|
$
|
5.4
|
|
|
|
|
|
|
|
|
|
|
Interest income includes interest received on short-term
investments, notes receivable, and past due accounts receivable.
Income tax benefit for 2009 totaled $67.8 million, which
equates to an effective tax rate of 38.4%. Income tax benefit
for 2008 totaled $3.2 million, which equates to an
effective tax rate of 0.8%. The effective tax rate was lower in
2008 due to a valuation allowance recorded on deferred tax
assets in 2008 which increased income tax expense by
$118.0 million and certain goodwill impairment charges of
$77.3 million in 2008 that were not tax affected. Our 2009
federal net operating losses resulted in an income tax refund
receivable, and corresponding income tax benefit, due to our
ability to carry back the losses for a period of five years
under the provisions of the Worker, Home Ownership and Business
Assistance Act of 2009, which was signed into law on
November 6, 2009. Prior to this legislation, the carry back
was limited to a period of two years.
Loss from continuing operations per common share on a diluted
basis was $2.25 in 2009 and $8.53 in 2008. Weighted average
shares outstanding used in the calculation of loss per common
share on a diluted basis were 48.3 million in 2009 and
48.7 million in 2008.
Net earnings from discontinued operations, including the gain on
the sale of Hickory Business Furniture of $28.9 million,
were $29.9 million in 2008.
Year Ended
December 31, 2008 Compared to Year Ended December 31,
2007
Net sales for 2008 were $1,743.2 million compared to
$2,082.1 million in 2007, a decrease of
$338.9 million, or 16.3%. The decrease in net sales was
primarily driven by weak retail conditions and decisions to
abandon unprofitable products, customers, and programs,
resulting in lower sales volume, partially offset by lower price
discounts.
Gross profit for 2008 was $314.5 million compared to
$416.1 million in 2007. Gross margin decreased from 20.0%
in 2007 to 18.0% in 2008. The decline in gross profit is
primarily attributable to the lower sales volume, charges to
reduce inventory carrying values to market values, and reduced
capacity utilization, partially offset by price increases and
reduced discounting.
Selling, general, and administrative expenses increased to
$524.4 million in 2008 from $462.3 million in 2007. As
a percentage of net sales, selling, general, and administrative
expenses increased from 22.2% in 2007 to 30.1% in 2008. The
increase in selling, general, and administrative expenses was
primarily driven by increases in bad debt expense
($15.8 million), closed store costs ($25.0 million),
severance
22
charges ($9.3 million), advisory fees ($8.6 million),
impairment charges related to assets
held-for-sale
($13.5 million), gain on sale of a plane in 2007
($2.9 million), and initial redundant costs associated with
the transition to a shared services organization, partially
offset by decreases in compensation expense ($8.9 million)
and advertising expense ($9.6 million).
Impairment of intangible assets increased to $202.0 million
in 2008 from $7.1 million in 2007. In 2008, the company
recorded a charge of $166.7 million to write off all
goodwill and a charge of $35.3 million for the partial
write down of certain trade names. The charges reflected the
reduction in valuation calculations that incorporated a dramatic
deterioration of near-term economic forecast data. In 2007, we
recorded a charge of $7.1 million for the partial write
down of certain trade names.
Interest expense consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Interest expense
|
|
$
|
12.5
|
|
|
$
|
21.1
|
|
Waiver fees and write off of deferred financing fees
|
|
|
|
|
|
|
2.1
|
|
Make-whole premium, net of swap gain
|
|
|
|
|
|
|
14.2
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12.5
|
|
|
$
|
37.4
|
|
|
|
|
|
|
|
|
|
|
Interest expense for 2008 totaled $12.5 million compared to
$37.4 million in 2007. The decrease in interest expense
resulted from refinancing costs, including waiver fees and
make-whole premium in 2007, a reduction in outstanding debt, and
lower interest rates.
Other income, net consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Interest income
|
|
$
|
2.8
|
|
|
$
|
3.7
|
|
Gain on termination of hedge accounting
|
|
|
|
|
|
|
4.1
|
|
Other
|
|
|
2.6
|
|
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5.4
|
|
|
$
|
10.2
|
|
|
|
|
|
|
|
|
|
|
The decrease in interest income from 2007 to 2008 is due to the
decrease in short-term investments and notes receivable in 2008.
In addition, in the second quarter of 2007, in anticipation of
refinancing the Note Purchase Agreement, we discontinued hedge
accounting treatment on a treasury lock agreement and recorded a
gain of $4.1 million.
Income tax benefit for 2008 totaled $3.2 million, which
equates to an effective tax rate of 0.8%. Income tax benefit for
2007 totaled $29.3 million, which equates to an effective
tax rate of 36.4%. The decrease in the effective tax rate for
2008 resulted from a valuation allowance recorded on deferred
tax assets which increased income tax expense by
$118.0 million and certain goodwill impairment charges of
$77.3 million that are not tax effected.
Loss from continuing operations per common share on a diluted
basis was $8.53 in 2008 and $1.06 in 2007. Weighted average
shares outstanding used in the calculation of loss per common
share on a diluted basis were 48.7 million in 2008 and
48.4 million in 2007.
Net sales from discontinued operations were $15.3 million
in 2008 compared with $63.6 million in 2007. Net earnings
from discontinued operations, including the gain on the sale of
Hickory Business Furniture of $28.9 million, were
$29.9 million in 2008 compared with $5.6 million in
2007.
23
Retail Results of
Operations
Based on the structure of our operations and management and the
similarity of the economic environment in which our significant
operations compete, we have only one reportable segment.
However, as a supplement to the information required in this
Form 10-K,
we have summarized the following results of our company-owned
Thomasville Home Furnishings Stores and all other company-owned
retail stores, with dollar amounts presented in millions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomasville Stores(a)
|
|
|
All Other Retail Stores(b)
|
|
|
|
Year Ended December 31,
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in millions)
|
|
|
Net sales
|
|
$
|
84.9
|
|
|
$
|
61.3
|
|
|
$
|
43.0
|
|
|
$
|
73.8
|
|
Cost of sales
|
|
|
49.8
|
|
|
|
38.6
|
|
|
|
28.2
|
|
|
|
46.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
35.1
|
|
|
|
22.7
|
|
|
|
14.8
|
|
|
|
26.9
|
|
SG&A expenses open stores
|
|
|
56.5
|
|
|
|
36.9
|
|
|
|
27.8
|
|
|
|
40.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss open stores(d)
|
|
$
|
(21.4
|
)
|
|
$
|
(14.2
|
)
|
|
$
|
(13.0
|
)
|
|
$
|
(13.5
|
)
|
SG&A expenses closed stores
|
|
|
|
|
|
|
|
|
|
|
16.0
|
|
|
|
39.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss(d)
|
|
$
|
(21.4
|
)
|
|
$
|
(14.2
|
)
|
|
$
|
(29.0
|
)
|
|
$
|
(53.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of open stores at end of period
|
|
|
49
|
|
|
|
44
|
|
|
|
15
|
|
|
|
16
|
|
Number of closed locations at end of period
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
26
|
|
Same-store-sales(c):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual percentage
|
|
|
(20.3
|
)%
|
|
|
(4.5
|
)%
|
|
|
|
(e)
|
|
|
|
(e)
|
Number of stores
|
|
|
25
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
a) |
|
This supplemental data includes company-owned Thomasville retail
store locations that were open at the end of 2009 and 2008. |
|
b) |
|
This supplemental data includes all company-owned retail stores
other than open Thomasville stores (all other retail
stores). This data also includes costs of
$16.0 million in 2009 and $39.9 million in 2008
associated with closed retail locations which includes occupancy
costs, lease termination costs, and costs associated with closed
store lease liabilities. |
|
c) |
|
The same-store-sales percentage is based on sales from stores
that have been in operation and company-owned for at least
15 months. |
|
d) |
|
Operating loss does not include our wholesale profit on the
above retail net sales. |
|
e) |
|
Same-store-sales information is not meaningful and is not
presented for all other retail stores because 1) results
include retail store locations of multiple brands, including
eleven Drexel, two Lane, one Henredon, and one Broyhill at
December 31, 2009; and 2) it is not our long-term
strategic initiative to grow non-Thomasville company-owned
retail store locations. |
Sales increased for open company-owned Thomasville retail store
locations for the year ended December 31, 2009 as compared
to the year ended December 31, 2008, primarily due to the
operation of 37 company-owned stores assumed from
independent dealers since January 1, 2008. Seven of these
stores were opened in the fourth quarter of 2008 and five of
these stores were opened in 2009 which are excluded from the
same-store-sales calculation because they had not been in
operation for at least 15 months as of December 31,
2009. In addition to the above company-owned stores, there were
76 and 95 Thomasville dealer-owned stores at December 31,
2009 and 2008, respectively.
24
Financial
Condition and Liquidity
Liquidity
Cash and cash equivalents at December 31, 2009 totaled
$83.9 million, compared to $106.6 million at
December 31, 2008. Net cash provided by operating
activities totaled $77.6 million in 2009 compared with
$41.4 million in 2008. Lower net losses from operations,
excluding non-cash charges in both periods, contributed
increased cash flow from operations in 2009 as compared to 2008,
partially offset by lower cash generated from working capital
and payments of long-term incentive compensation in the first
quarter of 2009. Net cash used by investing activities for 2009
totaled $5.3 million compared with net cash provided by
investing activities of $43.1 million in 2008. The decrease
in cash provided by investing activities is primarily the result
of a reduction of proceeds from the sale of business in 2009 as
compared to 2008, partially offset by fewer acquisitions of
stores requiring cash payments and fewer additions to property,
plant and equipment in 2009 as compared to 2008. Net cash used
in financing activities totaled $95.0 million in 2009
compared with $96.7 million in 2008. Net cash used by
financing activities in 2009 consisted of payment of long-term
debt. Net cash used by financing activities in 2008 consisted
primarily of payment of long-term debt ($110.8 million,
$20.0 million of which was paid from a restricted cash
account) and cash dividends ($5.8 million).
Working capital was $326.9 million at December 31,
2009, compared to $458.4 million at December 31, 2008.
The current ratio was 2.8-to-1 at December 31, 2009,
compared to 3.0-to-1 at December 31, 2008. The decrease in
working capital primarily resulted from reductions in inventory,
accounts receivable, and cash and cash equivalents, partially
offset by an increase in income tax refund receivable and
decreases in accrued employee compensation and current
maturities of long-term debt. As described in the next section
on Financing Arrangements, our borrowings under our
asset-based loan (ABL) are limited by the amount of
our eligible accounts receivable and inventory. Therefore, as
our accounts receivable and inventory decrease in total, the
amount we can borrow under our asset-based loan decreases, to a
lesser extent, based on collateral borrowing calculations. In
2009, $95.0 million of cash was used in the payment of
long-term debt, the payment of which was driven primarily by the
decrease in our accounts receivable and inventory from 2008 to
2009.
The primary items impacting our liquidity in the future are cash
from operations and working capital, capital expenditures,
acquisition of stores, sale of surplus assets, borrowings and
payments under our ABL, pension funding requirements, and in
2010, receipt of federal income tax refunds.
At December 31, 2009, we had $83.9 million of cash and
cash equivalents, $95.0 million of debt outstanding, and
excess availability to borrow up to an additional
$16.9 million subject to certain provisions, including
those provisions described in Financing Arrangements below. The
breach of any of these provisions could result in a default
under the ABL and could trigger acceleration of repayment, which
would have a significant adverse impact on our liquidity and our
business. While we expect to comply with the provisions of the
agreement throughout 2010, further deterioration in the economy
and our results could cause us to not be in compliance with our
ABL agreement. While we would attempt to obtain waivers for
noncompliance, we may not be able to obtain waivers, which could
have a significant adverse impact to our liquidity and our
business.
In light of deterioration of the global economy and uncertainty
about the extent or continuation of these conditions in the
foreseeable future, we are focused on effective cash management,
reducing costs, and preserving cash related to capital
expenditures and acquisition of stores. For example, we review
all capital projects and are committed to execute only on those
projects that are either necessary for business operations or
have an attractive expected rate of return. Also, we will
acquire stores only if we are required as the prime tenant or
guarantor on the lease or if we expect a more than adequate
return on our investment. However, if we do not have sufficient
cash reserves, cash flow from our operations, or our borrowing
capacity under our ABL is insufficient, we may need to raise
additional funds through equity or debt financings in the future
in order to meet our operating and capital needs. Nevertheless,
we may not be able to secure adequate debt or equity financing
on favorable terms, or at all, at the time when we need such
funding. In the event that we are unable to raise additional
funds, our liquidity will be adversely
25
impacted and our business could suffer. If we are able to secure
additional financing, these funds could be costly to secure and
maintain, which could significantly impact our earnings and our
liquidity.
At December 31, 2009, income tax refund receivable was
$58.9 million and the majority of the refund is expected to
be received during the first half of 2010, subject to income tax
return filing. The refund primarily stems from the Worker, Home
Ownership and Business Assistance Act of 2009, which was signed
into law on November 6, 2009 and allows the carry back of
2009 net operating losses for a period of 5 years,
with certain limitations. Prior to this legislation, the carry
back was limited to a period of two years.
Financing
Arrangements
As of December 31, 2009 and 2008, long-term debt consisted
of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Asset-based loan
|
|
$
|
95.0
|
|
|
$
|
190.0
|
|
Less: current maturities
|
|
|
17.0
|
|
|
|
30.0
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
78.0
|
|
|
$
|
160.0
|
|
|
|
|
|
|
|
|
|
|
On August 9, 2007, we refinanced our revolving credit
facility with a group of financial institutions. The facility is
a five-year asset-based loan (ABL) with commitments
to lend up to $450.0 million. The facility is secured by
our accounts receivable, inventory and cash and is guaranteed by
all of our domestic subsidiaries.
The ABL provides for the issuance of letters of credit and cash
borrowings. The issuance of letters of credit and cash
borrowings are limited by the level of a borrowing base
consisting of eligible accounts receivable and inventory. As of
December 31, 2009, there were $95.0 million of cash
borrowings and $17.3 million in letters of credit
outstanding.
The excess of the borrowing base over the current level of
letters of credit and cash borrowings outstanding represents the
additional borrowing availability under the ABL. Certain
covenants and restrictions, including cash dominion, weekly
borrowing base reporting, and a fixed charge coverage ratio,
would become effective if excess availability fell below various
thresholds. If we fall below $75.0 million of availability,
we are subject to cash dominion and weekly borrowing base
reporting. If we fall below $62.5 million of availability,
we are also subject to the fixed charge coverage ratio, which we
currently do not meet. As of December 31, 2009, excess
availability was $79.4 million. Therefore, we have
$4.4 million of availability without being subject to the
cash dominion and weekly reporting covenants of the agreement
and $16.9 million of availability before we would be
subject to the fixed charge coverage ratio.
We manage our excess availability to remain above the
$75.0 million threshold, as we choose not to be subject to
the cash dominion and weekly reporting covenants. We do not
expect to fall below this threshold in 2010. In addition to our
borrowing capacity described above, we had $83.9 million of
cash and cash equivalents at December 31, 2009.
The borrowing base is reported on the 25th day of each
month based on our financial position at the end of the previous
month. Our borrowing base calculations are subject to periodic
examinations by the financial institutions which can result in
adjustments to the borrowing base and our availability under the
ABL. These examinations have not resulted in significant
adjustments to our borrowing base or availability in the past
and are not expected to result in material adjustments in the
future.
Cash borrowings under the ABL will be at either (i) a base
rate (the greater of the prime rate or the Federal Funds
Effective Rate plus
1/2%)
or (ii) an adjusted Eurodollar rate plus an applicable
margin, depending upon the type of loan selected. The applicable
margin over the adjusted Eurodollar rate is 1.50% as of
December 31, 2009 and will fluctuate with excess
availability. As of December 31, 2009, loans outstanding
under the ABL consisted of $80.0 million based on the
adjusted Eurodollar rate at a weighted average interest rate of
1.83% and $15.0 million based on the adjusted prime rate at
an interest rate of 3.25%. The weighted average interest rate
for all loans outstanding as of December 31, 2009 was 2.05%.
26
Under the terms of the ABL, we are required to comply with
certain operating covenants and provide certain representations
to the financial institutions, including a representation after
each annual report is filed with the Securities and Exchange
Commission that our pension underfunded status does not exceed
$50.0 million for any plan. After the filing of our
Form 10-K
for the year ended December 31, 2008, we would not have
been in compliance with this representation. However, we
obtained a waiver (the waiver) to this required
representation (the representation) until the later
of February 28, 2010 or such date, not to exceed
January 1, 2011, that the pension relief, under the Worker,
Retiree, and Employer Recovery Act of 2008, signed into law on
December 23, 2008, ceases to be applicable to our plan. As
consideration for the waiver, we agreed to the modification of
certain administrative clauses in the ABL agreement, and as a
result we agreed to 1) submit condensed mid-month borrowing
base information and 2) increase the frequency, from
quarterly to monthly, at which we submit certain financial
information to the financial institutions.
At December 31, 2009, the underfunded status of our
qualified pension plan was $115.5 million, which exceeds
the $50.0 million threshold by $65.5 million. We
considered the underfunded status of our qualified pension plan
in determining that it remained appropriate to classify
$78.0 million of amounts outstanding under the ABL as
long-term debt at December 31, 2009. This classification is
appropriate because the waiver prevents us from being required
to make the representation regarding our pension underfunded
status, for a period of one year from the balance sheet date.
Because we may not be able to produce the representation upon
the expiration of the waiver on January 1, 2011, we expect
to reclassify all amounts outstanding under the ABL to current
maturities in our
Form 10-Q
for the period ended March 31, 2010. The classification of
our outstanding debt would then likely remain current until the
pension underfunded status is reduced to an amount less than
$50.0 million, the waiver is extended to a period greater
than one year from the balance sheet date, the terms of the ABL
are modified to remove the representation requirement, or the
outstanding debt is repaid.
We believe our current cash position along with our cash flow
from operations and ABL availability will be sufficient to fund
our liquidity requirements for the foreseeable future.
In 2007, funds borrowed under the ABL were used to repay in full
the existing indebtedness in the amount of $150.0 million
owed pursuant to the terms of the unsecured revolving credit
facility dated April 21, 2006, which terminated upon
payment. We also repaid in full the $150.0 million of
senior notes issued under the Note Purchase Agreement dated
May 17, 2006. In connection with the termination of the
Note Purchase Agreement, we paid and charged to interest expense
a make-whole premium of $17.0 million. In order to mitigate
the risk associated with the make-whole premium we entered into
a financial hedging agreement to offset changes in the interest
rate and recognized a gain of $2.8 million. This gain was
recorded as a reduction of interest expense. In addition, due to
the extinguishment of these two credit facilities, deferred
financing fees of $1.0 million were charged to interest
expense. The impact of these items related to the refinancing of
the prior debt facilities was to increase interest expense by
$15.2 million for the year ended December 31, 2007.
Funded Status
of Qualified Defined Benefit Pension Plan
The projected benefit obligation of our qualified defined
benefit pension plan exceeded the fair value of plan assets by
$115.5 million at December 31, 2009. In December 2008,
the federal government passed legislation that provides relief
through 2010 from the funding requirements under the Pension
Protection Act of 2006. Due to this legislation, our minimum
required pension contributions for 2010 are not significant.
However, if the relief provided by the federal government is no
longer applicable to our qualified pension plan, or if there is
downward pressure on the asset values of the plan, or if the
assets fail to recover in value, or if the present value of the
projected benefit obligation of the plan increases, as would
occur in the event of a decrease in the discount rate used to
measure the obligation, it would necessitate significantly
increased funding of the plan in the future.
While our required contribution to the plan in 2010 is only
approximately $3 million, we may voluntarily choose to make
additional contributions. The contributions may be in the form
of cash, company common
27
stock or a combination of both. Any contributions using company
common stock would require the approval of the companys
Board of Directors. Any contributions using company common stock
would be of a size so as to not result in the trust funds
holding 5% or more of the companys outstanding common
stock at the time of contribution.
In addition, the funded status of our pension plan also impacts
our compliance with the terms of our ABL. For additional
information on this, see Financial Condition and
Liquidity Financing Arrangements above.
Contractual
Obligations and Other Commitments
The following table summarizes the payments related to our
outstanding contractual obligations as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
|
|
|
|
|
|
|
|
|
More
|
|
|
|
|
|
|
Than 1
|
|
|
1-3
|
|
|
4-5
|
|
|
Than 5
|
|
|
|
|
|
|
Year
|
|
|
Years
|
|
|
Years
|
|
|
Years
|
|
|
Total
|
|
|
Long-term debt obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-based loan
|
|
$
|
17.0
|
|
|
$
|
78.0
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
95.0
|
|
Interest expense(1)
|
|
|
1.6
|
|
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
|
4.2
|
|
Operating lease obligations (net of subleases)
|
|
|
51.3
|
|
|
|
81.6
|
|
|
|
54.1
|
|
|
|
39.6
|
|
|
|
226.6
|
|
Purchase obligations(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
69.9
|
|
|
$
|
162.2
|
|
|
$
|
54.1
|
|
|
$
|
39.6
|
|
|
$
|
325.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Interest payments calculated at rates in effect at
December 31, 2009. |
|
(2) |
|
We are not a party to any long-term supply contracts. We do, in
the normal course of business, initiate purchase orders for the
procurement of finished goods, raw materials, and other
services. All purchase orders are based upon current
requirements and are fulfilled within a short period of time. |
Not included in the table above are obligations under our
defined benefit plans of $136.5 million, obligations for
uncertain tax positions of $8.3 million, and accrued
workers compensation of $11.5 million as the timing
of payments cannot be reasonably estimated.
Off-Balance
Sheet Arrangements
We are the prime tenant on operating leases that we have
subleased to independent furniture dealers. In addition, we
guarantee leases of company-brand stores operated by independent
furniture dealers and guarantee leases of tractors and trailers
operated by an independent transportation company. These
subleases and guarantees have remaining terms ranging up to
six years and generally require us to make lease payments
in the event of default by the sublessor or independent party.
In the event of default, we have the right to assign or assume
the lease. As of December 31, 2009, the total future
payments under lease guarantees were $16.3 million, which
are not included in the Contractual Obligations table above, and
total minimum payments under subleases were $22.8 million.
We considered certain of these independent parties with lease
guarantees to be at risk of default and we recorded a lease
termination liability of $0.6 million to cover estimated
losses on these guaranteed leases.
Critical
Accounting Policies
Our discussion and analysis of our financial condition and
results of operations is based upon the Consolidated Financial
Statements and Notes to the Consolidated Financial Statements,
which have been prepared in accordance with accounting
principles generally accepted in the United States
(U.S. GAAP). The preparation of financial
statements in accordance with U.S. GAAP requires us to make
estimates, judgments, and assumptions, which we believe to be
reasonable, based on the information available. These estimates
and assumptions affect the reported amounts of assets,
liabilities, revenues, expenses, and related disclosure of
contingent assets and liabilities. Actual results could differ
from those estimates.
28
The consolidated financial statements consist of the accounts of
our company and its subsidiaries. All intercompany balances and
transactions have been eliminated in consolidation. The
companys fiscal year ends on December 31. The
subsidiaries included in the consolidated financial statements
report their results of operations as of the Saturday closest to
December 31. Accordingly, the results of our
subsidiaries operations periodically include a 53-week
fiscal year. Fiscal years 2009 and 2007 were 52-week years and
fiscal year 2008 was a 53-week year for our subsidiaries.
Our significant accounting policies are set forth below and in
the notes to the consolidated financial statements.
Revenue
Recognition
Revenues (sales) are recognized when the following criteria are
met: (1) persuasive evidence of an arrangement exists;
(2) there is a fixed or determinable price;
(3) delivery has occurred; and (4) collectability is
reasonably assured. These criteria are satisfied and revenue
recognized primarily upon shipment of product. Appropriate
provisions for customer returns and discounts are recorded based
upon historical results.
Allowance for
Doubtful Accounts
We maintain an allowance for doubtful accounts for estimated
losses resulting from the inability of our customers to make
required payments. The allowance for doubtful accounts is based
upon the review of specific customer account balances,
historical experience, market conditions, customer credit and
financial evaluation, and an aging of the accounts receivable.
Inventories
Inventories are stated at the lower of cost
(first-in,
first-out) or market. Inventories are regularly reviewed for
excess quantities and obsolescence based upon historical
experience, specific identification of discontinued items,
future demand, and market conditions.
Intangible
Assets
Our trade names are tested for impairment annually in the fourth
fiscal quarter. Trade names, and long-lived assets, are also
tested for impairment whenever events or changes in
circumstances indicate that the asset may be impaired. Each
quarter, we assess whether events or changes in circumstances
indicate a potential impairment of these assets considering many
factors, including significant changes in market capitalization,
cash flow or projected cash flow, the condition of assets, and
the manner in which assets are used.
Trade names are tested by comparing the carrying value and fair
value of each trade name to determine the amount, if any, of
impairment. The fair value of trade names is calculated using a
relief from royalty payments methodology. This
approach involves two steps: (i) estimating royalty rates
for each trademark and (ii) applying these royalty rates to
a net sales stream and discounting the resulting cash flows to
determine fair value.
In the fourth quarter of 2009, we tested our trade names for
impairment and recorded an impairment charge of
$39.1 million, resulting in the carrying value of each of
our trade names being reduced, and thus equal, to the estimated
fair value. The decrease in the fair value of these trade names
was primarily caused by an increase in the discount rate applied
to the assumed cash flows. Any future decrease in the fair value
of these trade names would result in a corresponding impairment
charge. The estimated fair value of our trade names is highly
contingent upon sales trends and assumptions including royalty
rates, net sales streams, and a discount rate. Lower sales
trends, decreases in projected net sales, decreases in royalty
rates, or increases in the discount rate would cause additional
impairment charges and a corresponding reduction in our earnings.
29
We determine royalty rates for each trademark considering
contracted rates and industry benchmarks. Royalty rates
generally are not volatile and do not fluctuate significantly
with short term changes in economic conditions. A one percent
decrease in assumed royalty rates would have resulted in
additional impairment of $0.8 million.
Weighted average net sales streams are calculated for each
trademark based on a probability weighting assigned to each
reasonably possible future net sales stream. The probability
weightings are determined considering historical performance,
management forecasts and other factors such as economic
conditions and trends. Estimated net sales streams could
fluctuate significantly based on changes in the economy, actual
sales, or forecasted sales. A one percent decrease in the
assumed net sales streams would have resulted in additional
impairment of $0.7 million.
The discount rate is a calculated weighted average cost of
capital determined by observing typical rates and proportions of
interest-bearing debt, preferred equity, and common equity of
publicly traded companies engaged in lines of business similar
to our company. The discount rate could fluctuate significantly
with changes in the risk profile of our industry or in the
general economy. A one percent increase in the assumed discount
rate would have resulted in additional impairment of
$1.0 million.
Lease
Termination Costs
We maintain a liability for costs associated with operating
leases for closed retail locations. The liability is determined
based upon the present value of the remaining lease rentals
reduced by the current market rate for sublease rentals of
similar properties. This liability is reviewed quarterly and
adjusted as necessary to reflect changes in estimated sublease
rentals.
Retirement
Plans
Defined benefit plan expense and obligation calculations are
dependent on various assumptions. These assumptions include
discount rate, expected long-term rate of return on plan assets,
and rate of compensation increases.
The discount rate is selected based on yields of high quality
bonds with cash flows matching the timing and amount of expected
future benefit payments. The plans projected cash flow is
matched to a yield curve comprised of over 500 bonds rated Aa by
Moodys as of the measurement date. The expected long-term
rate of return on plan assets assumption was developed through
analysis of historical market returns and trust fund returns by
asset class, current market conditions, and anticipated future
long-term performance by asset class. While consideration is
given to recent asset performance, this assumption represents a
long-term, prospective return. The long-term rate of
compensation increase is applicable for a period of one year, as
transition benefits will cease to accumulate after 2010.
We believe the assumptions to be reasonable; however,
differences in assumptions would impact the calculated
obligation and future expense. For example, a five percent
change in the discount rate would result in a $16.0 million
change in the pension obligation and a five percent change in
the expected return on plan assets would result in a
$1.1 million change in pension expense.
Recently Issued
Statements of Financial Accounting Standards
In September 2006, the FASB issued a new standard for fair value
measurements which defines fair value, establishes a framework
for measuring fair value in U.S. GAAP, and expands the
disclosure requirements regarding fair value measurements. The
standard does not introduce new requirements mandating the use
of fair value. The standard defines fair value as the
price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date. The definition is
based on an exit price rather than an entry price, regardless of
whether the entity plans to hold or sell the asset. The standard
is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods
within those fiscal years. The required transition date for this
standard was delayed until fiscal years beginning after
November 15, 2008
30
for non-financial assets and liabilities, except for those that
are recognized or disclosed at fair value in the financial
statements on a recurring basis. The adoption on January 1,
2008 of the portion of the standard that was not delayed until
fiscal years beginning after November 15, 2008 did not have
a material effect on our financial position or results of
operations. The adoption of the remaining provisions of the
standard on January 1, 2009 did not have a material effect
on our financial position or results of operations.
In December 2007, the FASB issued a new standard for business
combinations that requires an acquiring entity to recognize all
the assets acquired and liabilities assumed in a transaction at
the acquisition-date fair value with limited exceptions. This
standard applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after
December 15, 2008. We adopted the provisions of this
standard on January 1, 2009. The adoption of this standard
did not affect our financial position or results of operations.
In December 2007, the FASB issued a new standard for
noncontrolling interests in consolidated financial statements.
This standard establishes new accounting and reporting
requirements for the noncontrolling interest in a subsidiary and
for the deconsolidation of a subsidiary. This standard is
effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008. The
adoption of this standard on January 1, 2009 did not affect
our financial position or results of operations.
In December 2008, the FASB issued a new standard on
employers disclosures about postretirement benefit plan
assets. This standard enhances the required disclosures related
to postretirement benefit plan assets including disclosures
concerning a companys investment policies for benefit plan
assets, categories of plan assets, fair value measurements of
plan assets, and concentrations of risk within plan assets. This
standard is effective for fiscal years ending after
December 15, 2009 and the disclosures about plan assets
required by this standard are incorporated in Note 10
Employee Benefits in Part II, Item 8 of
this
Form 10-K.
The adoption of this standard did not affect our financial
position or results of operations.
In June 2009, the FASB issued Statement of Financial Accounting
Standards No. 168 (SFAS 168), The FASB
Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles, a replacement of FASB
Statement No. 162. SFAS 168 establishes the FASB
Accounting Standards Codification (the Codification)
as the source of authoritative U.S. GAAP recognized by the
FASB to be applied by nongovernmental entities. Rules and
interpretive releases of the Securities and Exchange Commission
(SEC) under authority of federal securities laws are
also sources of authoritative U.S. GAAP for SEC
registrants. The codification does not replace or affect
guidance issued by the SEC. The adoption of SFAS 168 did
not affect our financial position or results of operations.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
We have exposure to market risk from changes in interest rates.
Our exposure to interest rate risk consists of interest expense
on our asset-based loan and interest income on our cash
equivalents. A 10% interest rate increase would result in
additional interest expense of $0.1 million annually. We
have no derivative financial instruments at December 31,
2009.
31
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
FURNITURE BRANDS
INTERNATIONAL, INC. AND SUBSIDIARIES
Index to
Consolidated Financial Statements and Schedules
|
|
|
|
|
|
|
Page No.
|
|
|
|
|
33
|
|
|
|
|
|
|
Consolidated Financial Statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
38
|
|
|
|
|
|
|
Consolidated Financial Statement Schedules:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67
|
|
32
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Furniture Brands International, Inc.:
We have audited the accompanying consolidated balance sheets of
Furniture Brands International, Inc. as of December 31,
2009 and 2008, and the related consolidated statements of
operations, cash flows, and shareholders equity and
comprehensive income (loss) for each of the years in the
three-year period ended December 31, 2009. In connection
with our audits of the consolidated financial statements, we
have also audited the accompanying financial statement schedule.
These consolidated financial statements and financial statement
schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Furniture Brands International, Inc. as of
December 31, 2009 and 2008, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 2009, in conformity
with U.S. generally accepted accounting principles. Also in
our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Furniture Brands International, Inc.s internal control
over financial reporting as of December 31, 2009, based on
the criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report
dated March 2, 2010 expressed an unqualified opinion on the
effectiveness of the Companys internal control over
financial reporting.
St. Louis, Missouri
March 2, 2010
33
FURNITURE BRANDS
INTERNATIONAL, INC.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
83,872
|
|
|
$
|
106,580
|
|
Receivables, less allowances of $26,225 ($34,372 at
December 31, 2008)
|
|
|
125,513
|
|
|
|
178,590
|
|
Income tax refund receivable
|
|
|
58,976
|
|
|
|
38,090
|
|
Inventories
|
|
|
226,078
|
|
|
|
350,026
|
|
Prepaid expenses and other current assets
|
|
|
9,274
|
|
|
|
12,592
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
503,713
|
|
|
|
685,878
|
|
|
|
|
|
|
|
|
|
|
Property, plant, and equipment, net
|
|
|
134,352
|
|
|
|
150,864
|
|
Trade names
|
|
|
87,608
|
|
|
|
127,300
|
|
Other assets
|
|
|
32,342
|
|
|
|
35,476
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
758,105
|
|
|
$
|
999,518
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
$
|
17,000
|
|
|
$
|
30,000
|
|
Accounts payable
|
|
|
83,813
|
|
|
|
85,206
|
|
Accrued employee compensation
|
|
|
21,036
|
|
|
|
49,082
|
|
Other accrued expenses
|
|
|
54,912
|
|
|
|
63,214
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
176,761
|
|
|
|
227,502
|
|
Long-term debt
|
|
|
78,000
|
|
|
|
160,000
|
|
Deferred income taxes
|
|
|
25,737
|
|
|
|
27,917
|
|
Pension liability
|
|
|
135,557
|
|
|
|
137,199
|
|
Other long-term liabilities
|
|
|
79,259
|
|
|
|
80,406
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, 10,000,000 shares authorized, no par
value none issued
|
|
|
|
|
|
|
|
|
Common stock, 200,000,000 shares authorized,
$1.00 stated value 56,482,541 shares
issued at December 31, 2009 and December 31, 2008
|
|
|
56,483
|
|
|
|
56,483
|
|
Paid-in capital
|
|
|
224,133
|
|
|
|
224,419
|
|
Retained earnings
|
|
|
267,829
|
|
|
|
376,515
|
|
Accumulated other comprehensive loss
|
|
|
(111,471
|
)
|
|
|
(116,988
|
)
|
Treasury stock at cost 7,797,319 shares at
December 31, 2009 and 7,704,764 shares at
December 31, 2008
|
|
|
(174,183
|
)
|
|
|
(173,935
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
262,791
|
|
|
|
366,494
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
758,105
|
|
|
$
|
999,518
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
34
FURNITURE BRANDS
INTERNATIONAL, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands except per share data)
|
|
|
Net sales
|
|
$
|
1,224,370
|
|
|
$
|
1,743,176
|
|
|
$
|
2,082,056
|
|
Cost of sales
|
|
|
994,370
|
|
|
|
1,428,641
|
|
|
|
1,665,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
230,000
|
|
|
|
314,535
|
|
|
|
416,095
|
|
Selling, general, and administrative expenses
|
|
|
363,636
|
|
|
|
524,457
|
|
|
|
462,334
|
|
Impairment of goodwill
|
|
|
|
|
|
|
166,680
|
|
|
|
|
|
Impairment of trade names
|
|
|
39,050
|
|
|
|
35,271
|
|
|
|
7,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(172,686
|
)
|
|
|
(411,873
|
)
|
|
|
(53,339
|
)
|
Interest expense
|
|
|
5,342
|
|
|
|
12,510
|
|
|
|
37,388
|
|
Other income, net
|
|
|
1,549
|
|
|
|
5,425
|
|
|
|
10,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income tax benefit
|
|
|
(176,479
|
)
|
|
|
(418,958
|
)
|
|
|
(80,478
|
)
|
Income tax benefit
|
|
|
(67,793
|
)
|
|
|
(3,157
|
)
|
|
|
(29,261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(108,686
|
)
|
|
|
(415,801
|
)
|
|
|
(51,217
|
)
|
Net earnings from discontinued operations
|
|
|
|
|
|
|
29,920
|
|
|
|
5,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(108,686
|
)
|
|
$
|
(385,881
|
)
|
|
$
|
(45,649
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) per common share basic and
diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
$
|
(2.25
|
)
|
|
$
|
(8.53
|
)
|
|
$
|
(1.06
|
)
|
Net earnings from discontinued operations
|
|
|
|
|
|
|
0.61
|
|
|
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2.25
|
)
|
|
$
|
(7.92
|
)
|
|
$
|
(0.94
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
48,302
|
|
|
|
48,739
|
|
|
|
48,446
|
|
Diluted
|
|
|
48,302
|
|
|
|
48,739
|
|
|
|
48,446
|
|
See accompanying notes to consolidated financial statements.
35
FURNITURE BRANDS
INTERNATIONAL, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(108,686
|
)
|
|
$
|
(385,881
|
)
|
|
$
|
(45,649
|
)
|
Adjustments to reconcile net loss to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
20,738
|
|
|
|
25,307
|
|
|
|
31,473
|
|
Compensation expense (credit) related to stock option grants and
restricted stock awards
|
|
|
(524
|
)
|
|
|
4,310
|
|
|
|
3,251
|
|
Provision (benefit) for deferred income taxes
|
|
|
(8,034
|
)
|
|
|
41,799
|
|
|
|
(20,080
|
)
|
Gain on sale of discontinued operations
|
|
|
|
|
|
|
(48,109
|
)
|
|
|
|
|
Impairment of intangible assets
|
|
|
39,050
|
|
|
|
201,951
|
|
|
|
7,100
|
|
Other, net
|
|
|
3,545
|
|
|
|
16,360
|
|
|
|
6,713
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
50,764
|
|
|
|
110,073
|
|
|
|
63,627
|
|
Income tax refund receivable
|
|
|
(20,886
|
)
|
|
|
(31,041
|
)
|
|
|
(7,049
|
)
|
Inventories
|
|
|
126,944
|
|
|
|
66,548
|
|
|
|
100,019
|
|
Prepaid expenses and other assets
|
|
|
5,164
|
|
|
|
4,741
|
|
|
|
9,708
|
|
Accounts payable and other accrued expenses
|
|
|
(32,769
|
)
|
|
|
24,295
|
|
|
|
(12,482
|
)
|
Other long-term liabilities
|
|
|
2,293
|
|
|
|
11,029
|
|
|
|
16,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
77,599
|
|
|
|
41,382
|
|
|
|
152,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of stores, net of cash acquired
|
|
|
|
|
|
|
(14,659
|
)
|
|
|
(4,241
|
)
|
Proceeds from the sale of business, net of cash sold
|
|
|
|
|
|
|
73,359
|
|
|
|
|
|
Proceeds from the disposal of assets
|
|
|
4,480
|
|
|
|
3,363
|
|
|
|
23,161
|
|
Additions to property, plant, and equipment
|
|
|
(9,777
|
)
|
|
|
(18,977
|
)
|
|
|
(14,374
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by investing activities
|
|
|
(5,297
|
)
|
|
|
43,086
|
|
|
|
4,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments for debt issuance costs
|
|
|
|
|
|
|
|
|
|
|
(3,424
|
)
|
Additions to long-term debt
|
|
|
|
|
|
|
|
|
|
|
325,401
|
|
Payments of long-term debt
|
|
|
(95,000
|
)
|
|
|
(110,800
|
)
|
|
|
(336,201
|
)
|
Funding of restricted cash account
|
|
|
|
|
|
|
|
|
|
|
(20,000
|
)
|
Restricted cash used for the payment of long-term debt
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
Payments of cash dividends
|
|
|
|
|
|
|
(5,844
|
)
|
|
|
(31,012
|
)
|
Other
|
|
|
(10
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(95,010
|
)
|
|
|
(96,652
|
)
|
|
|
(65,236
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(22,708
|
)
|
|
|
(12,184
|
)
|
|
|
92,199
|
|
Cash and cash equivalents at beginning of year
|
|
|
106,580
|
|
|
|
118,764
|
|
|
|
26,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
83,872
|
|
|
$
|
106,580
|
|
|
$
|
118,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments (refunds) for income taxes, net
|
|
$
|
(36,731
|
)
|
|
$
|
2,039
|
|
|
$
|
1,776
|
|
Cash payments for interest expense
|
|
$
|
5,234
|
|
|
$
|
13,372
|
|
|
$
|
34,689
|
|
See accompanying notes to consolidated financial statements.
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in thousands)
|
|
|
Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
56,483
|
|
|
$
|
56,483
|
|
|
$
|
56,483
|
|
Stock plans activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
56,483
|
|
|
$
|
56,483
|
|
|
$
|
56,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-In Capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
224,419
|
|
|
$
|
226,773
|
|
|
$
|
227,520
|
|
Stock plans activity
|
|
|
(286
|
)
|
|
|
(2,354
|
)
|
|
|
(747
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
224,133
|
|
|
$
|
224,419
|
|
|
$
|
226,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
376,515
|
|
|
$
|
768,731
|
|
|
$
|
843,811
|
|
Net loss
|
|
|
(108,686
|
)
|
|
|
(385,881
|
)
|
|
|
(45,649
|
)
|
Adjustment to adopt FIN 48
|
|
|
|
|
|
|
|
|
|
|
1,581
|
|
Adjustment to adopt EITF
06-4
|
|
|
|
|
|
|
(491
|
)
|
|
|
|
|
Cash dividends (per share 2008-$0.12, 2007-$0.64)
|
|
|
|
|
|
|
(5,844
|
)
|
|
|
(31,012
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
267,829
|
|
|
$
|
376,515
|
|
|
$
|
768,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(116,988
|
)
|
|
$
|
(26,965
|
)
|
|
$
|
(33,188
|
)
|
Other comprehensive income (loss)
|
|
|
5,517
|
|
|
|
(90,023
|
)
|
|
|
6,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
(111,471
|
)
|
|
$
|
(116,988
|
)
|
|
$
|
(26,965
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(173,935
|
)
|
|
$
|
(180,256
|
)
|
|
$
|
(183,911
|
)
|
Stock plans activity
|
|
|
(248
|
)
|
|
|
6,321
|
|
|
|
3,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
(174,183
|
)
|
|
$
|
(173,935
|
)
|
|
$
|
(180,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shareholders Equity
|
|
$
|
262,791
|
|
|
$
|
366,494
|
|
|
$
|
844,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(108,686
|
)
|
|
$
|
(385,881
|
)
|
|
$
|
(45,649
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension liability
|
|
|
4,330
|
|
|
|
(85,632
|
)
|
|
|
2,784
|
|
Foreign currency translation
|
|
|
1,187
|
|
|
|
(4,391
|
)
|
|
|
3,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss)
|
|
$
|
5,517
|
|
|
$
|
(90,023
|
)
|
|
$
|
6,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Loss
|
|
$
|
(103,169
|
)
|
|
$
|
(475,904
|
)
|
|
$
|
(39,426
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
37
FURNITURE BRANDS
INTERNATIONAL, INC.
(Dollars in
thousands except per share data)
Furniture Brands International, Inc. is one of the worlds
leading designers, manufacturers, sourcers, and retailers of
home furnishings. We market through a wide range of retail
channels, from mass merchant stores to single-branded and
independent dealers to specialized interior designers. We serve
our customers through some of the best known and most respected
brands in the furniture industry, including Broyhill, Lane,
Thomasville, Drexel Heritage, Henredon, Hickory Chair, Pearson,
Laneventure, and Maitland-Smith.
Through these brands, we design, manufacture, source, market,
and distribute (i) case goods, consisting of bedroom,
dining room, and living room furniture, (ii) stationary
upholstery products, consisting of sofas, loveseats, sectionals,
and chairs, (iii) motion upholstered furniture, consisting
of recliners and sleep sofas, (iv) occasional furniture,
consisting of wood, metal and glass tables, accent pieces, home
entertainment centers, and home office furniture, and
(v) decorative accessories and accent pieces. Our brands
are featured in nearly every price and product category in the
residential furniture industry.
Substantially all of our sales are made to unaffiliated parties,
primarily furniture retailers. We have a diversified customer
base with no one customer accounting for 10% or more of
consolidated net sales and, other than the retail furniture
industry, no particular concentration of credit risk in one
economic sector. Foreign operations and foreign net sales are
not material.
|
|
2.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
The accompanying consolidated financial statements of Furniture
Brands International, Inc. and its subsidiaries (the
Company) have been prepared in accordance with
accounting principles generally accepted in the United States
(U.S. GAAP). The preparation of financial
statements in accordance with U.S. GAAP requires us to make
estimates, judgments, and assumptions, which we believe to be
reasonable, based on the information available. These estimates
and assumptions affect the reported amounts of assets,
liabilities, revenues, expenses, and related disclosure of
contingent assets and liabilities. Actual results could differ
from those estimates.
The consolidated financial statements consist of the accounts of
our company and its subsidiaries. All intercompany balances and
transactions have been eliminated in consolidation. The
companys fiscal year ends on December 31. The
subsidiaries included in the consolidated financial statements
report their results of operations as of the Saturday closest to
December 31. Accordingly, the results of our
subsidiaries operations periodically include a 53-week
fiscal year. Fiscal years 2009 and 2007 were 52-week years and
fiscal year 2008 was a 53-week year for our subsidiaries.
Our significant accounting policies are set forth below and in
the following notes to the consolidated financial statements.
Cash and Cash
Equivalents
We consider all short-term, highly liquid investments with an
original maturity of three months or less to be cash
equivalents. These investments include money market accounts,
short-term commercial paper, and United States Treasury Bills.
Allowance for
Doubtful Accounts
We maintain an allowance for doubtful accounts for estimated
losses resulting from the inability of our customers to make
required payments. The allowance for doubtful accounts is based
upon the review of
38
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
specific customer account balances, historical experience,
market conditions, customer credit and financial evaluation, and
an aging of the accounts receivable.
Inventories
Inventories are stated at the lower of cost
(first-in,
first-out) or market. Inventories are regularly reviewed for
excess quantities and obsolescence based upon historical
experience, specific identification of discontinued items,
future demand, and market conditions.
Property,
Plant, and Equipment
Property, plant, and equipment are recorded at cost when
acquired. Depreciation is calculated using the straight-line
method based on the estimated useful lives of the respective
assets, which generally range from 3 to 45 years for
buildings and improvements and from 3 to 12 years for
machinery and equipment. Long-lived assets are tested for
impairment whenever events or changes in circumstances indicate
the carrying value of the assets may not be recoverable.
Impairment losses are recognized if expected future cash flows
of the related assets are less than their carrying value.
Fair Value of
Financial Instruments
We consider the carrying amounts of cash and cash equivalents,
receivables, and accounts payable to approximate fair value
because of the short maturity of these financial instruments.
We consider the carrying value of amounts outstanding under the
Companys asset based loan to approximate fair value
because these amounts outstanding accrue interest at rates which
generally fluctuate with interest rate trends.
Revenue
Recognition
Revenues (sales) are recognized when the following criteria are
met: (1) persuasive evidence of an arrangement exists;
(2) there is a fixed or determinable price;
(3) delivery has occurred; and (4) collectability is
reasonably assured. These criteria are satisfied and revenue
recognized primarily upon shipment of product. Appropriate
provisions for customer returns and discounts are recorded based
upon historical experience.
Advertising
Costs
Advertising production costs are expensed when advertisements
are first aired or distributed. Total advertising costs were
$37,642 for 2009, $57,602 for 2008, and $70,308 for 2007.
Reclassifications
In the first quarter of 2008, we sold Hickory Business
Furniture, a wholly owned subsidiary that designs and
manufactures business furniture. As a result, this business unit
has been reflected as a discontinued operation in all periods
presented, in accordance with the Financial Accounting Standards
Board (FASB) Accounting Standards Codification
Section (ASC)
205-20
Discontinued Operations. Certain amounts in the
consolidated financial statements have been reclassified to
conform to this presentation. These reclassifications have no
effect on net earnings or stockholders equity as
previously reported.
39
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During the year ended December 31, 2009, we assumed the
leases on five stores that were previously operated by
independent dealers.
During the year ended December 31, 2008, we acquired 40
stores from thirteen of our dealers for total consideration of
$14,659. The acquisitions were asset purchases consisting mainly
of inventories and fixed assets and the assumption of certain
liabilities, primarily customer deposits.
During the year ended December 31, 2007, we acquired 18
stores from three of our dealers for total consideration of
$4,241. The acquisitions were asset purchases consisting mainly
of inventories and leasehold improvements and the assumption of
certain liabilities, primarily customer deposits, accounts
payable, and accrued expenses.
The Consolidated Statements of Operations include the results of
operations of the acquired stores from the date of their
acquisition. The pro forma impact of the acquisitions on prior
periods is not presented as the impact is not material to
operations.
|
|
4.
|
RESTRUCTURING AND
ASSET IMPAIRMENT CHARGES
|
We have been executing plans to reduce and consolidate our
domestic manufacturing capacity. Restructuring activity included
the closing of two manufacturing facilities and seven retail
stores in 2009, the closing of three manufacturing facilities
and nine retail stores in 2008, and the closing of five
manufacturing facilities and 18 retail stores in 2007.
Qualifying assets related to restructuring are recorded as
assets held for sale within Other Assets in the Consolidated
Balance Sheets until sold. Total assets held for sale were
$9,675 at December 31, 2009 and $10,017 at
December 31, 2008.
In addition, in 2009 and 2008 we have been executing plans to
reduce our workforce and to centralize certain functions,
including accounting, human resources, and supply chain
management, to a shared services function in St. Louis.
Restructuring and asset impairment charges were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Restructuring charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility costs to shutdown, cleanup, and vacate
|
|
$
|
250
|
|
|
$
|
586
|
|
|
$
|
681
|
|
Termination benefits
|
|
|
9,119
|
|
|
|
13,132
|
|
|
|
8,475
|
|
Closed store occupancy and lease costs
|
|
|
16,008
|
|
|
|
37,053
|
|
|
|
7,217
|
|
Loss (gain) on the sale of assets
|
|
|
337
|
|
|
|
(724
|
)
|
|
|
(1,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,714
|
|
|
|
50,047
|
|
|
|
14,700
|
|
Impairment charges
|
|
|
2,608
|
|
|
|
18,317
|
|
|
|
13,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,322
|
|
|
$
|
68,364
|
|
|
$
|
27,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations classification:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
$
|
8,215
|
|
|
$
|
7,007
|
|
|
$
|
5,784
|
|
Selling, general, and administrative expenses
|
|
|
20,107
|
|
|
|
61,357
|
|
|
|
22,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,322
|
|
|
$
|
68,364
|
|
|
$
|
27,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairment charges were recorded to reduce the carrying
value of all idle facilities and related machinery and equipment
to their net realizable value. The determination of the
impairment charges were
40
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
based primarily upon (i) consultations with real estate
brokers, (ii) proceeds from recent sales of Company
facilities, and (iii) the market prices being obtained for
similar long-lived assets.
Closed store occupancy and lease costs include occupancy costs
associated with closed retail locations, early contract
termination settlements for retail leases during the year, and
closed store lease liabilities representing the present value of
the remaining lease rentals reduced by the current market rate
for sublease rentals of similar properties. This liability is
reviewed quarterly and adjusted, as necessary, to reflect
changes in estimated sublease rentals.
Activity in the accrual for closed store lease liabilities was
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
Accrual for closed store lease liabilities at beginning of
period:
|
|
$
|
27,918
|
|
|
$
|
7,217
|
|
|
|
|
|
Charges to expense
|
|
|
7,537
|
|
|
|
23,158
|
|
|
|
|
|
Less cash payments
|
|
|
8,810
|
|
|
|
2,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual for closed store lease liabilities at end of period
|
|
$
|
26,645
|
|
|
$
|
27,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2009, $6,951 of the accrual for closed
store lease liabilities is classified as other accrued expenses,
with the remaining balance in other long-term liabilities.
Activity in the accrual for termination benefits was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
Accrual for termination benefits at beginning of period
|
|
$
|
10,012
|
|
|
$
|
|
|
|
|
|
|
Charges to expense
|
|
|
9,119
|
|
|
|
13,132
|
|
|
|
|
|
Less cash payments
|
|
|
14,993
|
|
|
|
3,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual for termination benefits at end of period
|
|
$
|
4,138
|
|
|
$
|
10,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accrual for termination benefits at December 31, 2009
is classified as accrued employee compensation.
Inventories are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Finished products
|
|
$
|
142,982
|
|
|
$
|
238,908
|
|
Work-in-process
|
|
|
15,320
|
|
|
|
21,405
|
|
Raw materials
|
|
|
67,776
|
|
|
|
89,713
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
226,078
|
|
|
$
|
350,026
|
|
|
|
|
|
|
|
|
|
|
41
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
6.
|
PROPERTY, PLANT,
AND EQUIPMENT
|
Major classes of property, plant, and equipment consist of the
following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Land
|
|
$
|
15,318
|
|
|
$
|
16,027
|
|
Buildings and improvements
|
|
|
186,884
|
|
|
|
198,836
|
|
Machinery and equipment
|
|
|
251,046
|
|
|
|
270,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
453,248
|
|
|
|
485,460
|
|
Less accumulated depreciation
|
|
|
318,896
|
|
|
|
334,596
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
134,352
|
|
|
$
|
150,864
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense was $20,738, $25,307, and $31,473 for the
years ended December 31, 2009, 2008, and 2007, respectively.
Trade name activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Beginning balance
|
|
$
|
127,300
|
|
|
$
|
162,571
|
|
Impairment
|
|
|
(39,050
|
)
|
|
|
(35,271
|
)
|
Income tax benefit of deductible goodwill
|
|
|
(642
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
87,608
|
|
|
$
|
127,300
|
|
|
|
|
|
|
|
|
|
|
Our trade names are tested for impairment annually, in the
fourth fiscal quarter. Trade names, and long-lived assets, are
also tested for impairment whenever events or changes in
circumstances indicate that the asset may be impaired. Each
quarter, we assess whether events or changes in circumstances
indicate a potential impairment of these assets considering many
factors, including significant changes in market capitalization,
cash flow or projected cash flow, the condition of assets, and
the manner in which assets are used.
Trade names are tested by comparing the carrying value and fair
value of each trade name to determine the amount, if any, of
impairment. The fair value of trade names is calculated using a
relief from royalty payments methodology. This
approach involves two steps: (i) estimating royalty rates
for each trademark and (ii) applying these royalty rates to
a net sales stream and discounting the resulting cash flows to
determine fair value.
In the fourth quarter of 2009, we tested our trade names for
impairment and recorded an impairment charge of $39,050,
resulting in the carrying value of each of our trade names being
reduced, and thus equal, to the estimated fair value. The
decrease in the fair value of these trade names was primarily
caused by an increase in the discount rate applied to the
assumed cash flows. Any future decrease in the fair value of
these trade names would result in a corresponding impairment
charge. The estimated fair value of our trade names is highly
contingent upon sales trends and assumptions including royalty
rates, net sales streams, and a discount rate. Lower sales
trends, decreases in projected net sales, decreases in royalty
rates, or increases in the discount rate would cause additional
impairment charges and a corresponding reduction in our earnings.
42
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We determine royalty rates for each trademark considering
contracted rates and industry benchmarks. Royalty rates
generally are not volatile and do not fluctuate significantly
with short term changes in economic conditions.
Weighted average net sales streams are calculated for each
trademark based on a probability weighting assigned to each
reasonably possible future net sales stream. The probability
weightings are determined considering historical performance,
management forecasts and other factors such as economic
conditions and trends. Estimated net sales streams could
fluctuate significantly based on changes in the economy, actual
sales, or forecasted sales.
The discount rate is a calculated weighted average cost of
capital determined by observing typical rates and proportions of
interest-bearing debt, preferred equity, and common equity of
publicly traded companies engaged in lines of business similar
to our company. The discount rate could fluctuate significantly
with changes in the risk profile of our industry or in the
general economy.
In 2008 and 2007, we tested our trade names for impairment and
recorded impairment charges of $35,271 and $7,100, respectively.
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Asset-based loan
|
|
$
|
95,000
|
|
|
$
|
190,000
|
|
Less: current maturities
|
|
|
17,000
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
78,000
|
|
|
$
|
160,000
|
|
|
|
|
|
|
|
|
|
|
On August 9, 2007, we refinanced our revolving credit
facility with a group of financial institutions. The facility is
a five-year asset-based loan (ABL) with commitments
to lend up to $450,000. The facility is secured by our accounts
receivable, inventory and cash and is guaranteed by all of our
domestic subsidiaries.
The ABL provides for the issuance of letters of credit and cash
borrowings. The issuance of letters of credit and cash
borrowings are limited by the level of a borrowing base
consisting of eligible accounts receivable and inventory. As of
December 31, 2009, there were $95,000 of cash borrowings
and $17,342 in letters of credit outstanding.
The excess of the borrowing base over the current level of
letters of credit and cash borrowings outstanding represents the
additional borrowing availability under the ABL. Certain
covenants and restrictions, including cash dominion, weekly
borrowing base reporting, and a fixed charge coverage ratio,
would become effective if excess availability fell below various
thresholds. If we fall below $75,000 of availability, we are
subject to cash dominion and weekly borrowing base reporting. If
we fall below $62,500 of availability, we are also subject to
the fixed charge coverage ratio, which we currently do not meet.
As of December 31, 2009, excess availability was $79,424.
Therefore, we have $4,424 of availability without being subject
to the cash dominion and weekly reporting covenants of the
agreement and $16,924 of availability before we would be subject
to the fixed charge coverage ratio.
We manage our excess availability to remain above the $75,000
threshold, as we choose not to be subject to the cash dominion
and weekly reporting covenants. We do not expect to fall below
this threshold in 2010. In addition to our borrowing capacity
described above, we had $83,872 of cash and cash equivalents at
December 31, 2009.
43
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The borrowing base is reported on the 25th day of each
month based on our financial position at the end of the previous
month. Our borrowing base calculations are subject to periodic
examinations by the financial institutions which can result in
adjustments to the borrowing base and our availability under the
ABL. These examinations have not resulted in significant
adjustments to our borrowing base or availability in the past
and are not expected to result in material adjustments in the
future.
Cash borrowings under the ABL will be at either (i) a base
rate (the greater of the prime rate or the Federal Funds
Effective Rate plus 1/2%) or (ii) an adjusted Eurodollar
rate plus an applicable margin, depending upon the type of loan
selected. The applicable margin over the adjusted Eurodollar
rate is 1.50% as of December 31, 2009 and will fluctuate
with excess availability. As of December 31, 2009, loans
outstanding under the ABL consisted of $80,000 based on the
adjusted Eurodollar rate at a weighted average interest rate of
1.83% and $15,000 based on the adjusted prime rate at an
interest rate of 3.25%. The weighted average interest rate for
all loans outstanding as of December 31, 2009 was 2.05%.
Under the terms of the ABL, we are required to comply with
certain operating covenants and provide certain representations
to the financial institutions, including a representation after
each annual report is filed with the Securities and Exchange
Commission that our pension underfunded status does not exceed
$50,000 for any plan. After the filing of our
Form 10-K
for the year ended December 31, 2008, we would not have
been in compliance with this representation. However, we
obtained a waiver (the waiver) to this required
representation (the representation) until the later
of February 28, 2010 or such date, not to exceed
January 1, 2011, that the pension relief, under the Worker,
Retiree, and Employer Recovery Act of 2008, signed into law on
December 23, 2008, ceases to be applicable to our plan. As
consideration for the waiver, we agreed to the modification of
certain administrative clauses in the ABL agreement, and as a
result we agreed to 1) submit condensed mid-month borrowing
base information and 2) increase the frequency, from
quarterly to monthly, at which we submit certain financial
information to the financial institutions.
At December 31, 2009 the underfunded status of our
qualified pension plan was $115,488, which exceeds the $50,000
threshold by $65,488. We considered the underfunded status of
our qualified pension plan in determining that it remained
appropriate to classify $78,000 of amounts outstanding under the
ABL as long-term debt at December 31, 2009. This
classification is appropriate because the waiver prevents us
from being required to make the representation regarding our
pension underfunded status, for a period of one year from the
balance sheet date. Because we may not be able to produce the
representation upon the expiration of the waiver on
January 1, 2011, we expect to reclassify all amounts
outstanding under the ABL to current maturities in our
Form 10-Q
for the period ended March 31, 2010. The classification of
our outstanding debt would then likely remain current until the
pension underfunded status is reduced to an amount less than
$50,000, the waiver is extended to a period greater than one
year from the balance sheet date, the terms of the ABL are
modified to remove the representation requirement, or the
outstanding debt is repaid.
The primary items impacting our liquidity in the future are cash
from operations and working capital, capital expenditures,
acquisition of stores, sale of surplus assets, borrowings and
payments under our ABL, pension funding requirements, and in
2010, receipt of federal income tax refunds.
At December 31, 2009, we had $83,872 of cash and cash
equivalents, $95,000 of debt outstanding, and excess
availability to borrow up to an additional $16,924 subject to
certain provisions, including those provisions described in
Note 8. Long-Term Debt. The breach of any of these
provisions could result in a default under the ABL and could
trigger acceleration of repayment, which would have a
significant adverse impact to our liquidity and our business.
While we expect to comply with the provisions of the agreement
throughout 2010, further deterioration in the economy and our
results could cause us to not be in
44
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
compliance with our ABL agreement. While we would attempt to
obtain waivers for noncompliance, we may not be able to obtain
waivers, which could have a significant adverse impact to our
liquidity and our business.
In light of deterioration of the global economy and uncertainty
about the extent or continuation of these conditions in the
foreseeable future, we are focused on effective cash management,
reducing costs, and preserving cash related to capital
expenditures and acquisition of stores. For example, we review
all capital projects and are committed to execute only on those
projects that are either necessary for business operations or
have an attractive expected rate of return. Also, we will
acquire stores only if we are required as the prime tenant or
guarantor on the lease or if we expect a more than adequate
return on our investment. However, if we do not have sufficient
cash reserves, cash flow from our operations, or our borrowing
capacity under our ABL is insufficient, we may need to raise
additional funds through equity or debt financings in the future
in order to meet our operating and capital needs. Nevertheless,
we may not be able to secure adequate debt or equity financing
on favorable terms, or at all, at the time when we need such
funding. In the event that we are unable to raise additional
funds, our liquidity will be adversely impacted and our business
could suffer. If we are able to secure additional financing,
these funds could be costly to secure and maintain, which could
significantly impact our earnings and our liquidity.
At December 31, 2009, income tax refund receivable was
$58,976 and the majority of the refund is expected to be
received during the first half of 2010, subject to income tax
return filing. The refund primarily stems from the Worker, Home
Ownership and Business Assistance Act of 2009, which was signed
into law on November 6, 2009 and allows the carry back of
2009 net operating losses for a period of 5 years,
with certain limitations. Prior to this legislation, the carry
back was limited to a period of two years.
We sponsor or contribute to retirement plans covering
substantially all employees. The total costs of these plans were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Defined benefit plans
|
|
$
|
7,038
|
|
|
$
|
3,906
|
|
|
$
|
8,065
|
|
Defined contribution plan (401k plan) company match
|
|
|
7,269
|
|
|
|
9,245
|
|
|
|
10,348
|
|
Other
|
|
|
604
|
|
|
|
425
|
|
|
|
1,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,911
|
|
|
$
|
13,576
|
|
|
$
|
19,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-Sponsored
Defined Benefit Plans
Through 2005, employees were covered primarily by
noncontributory plans, funded by company contributions to trust
funds held for the sole benefit of employees. We amended the
defined benefit plans, freezing and ceasing future benefits as
of December 31, 2005. Certain transitional benefits will
continue to accrue until December 31, 2010 for participants
who had attained age 50 and had completed 10 years of
service as of December 31, 2005. We currently provide
retirement benefits to our employees through a defined
contribution plan.
At December 31, 2009, the projected benefit obligation of
our defined benefit plans exceeded the fair value of plan assets
by $136,522, a decrease in the unfunded obligation of $759 from
December 31, 2008. No contributions were made to the trust
funds in 2008 or 2009. Our required contribution in 2010 is
approximately $3 million. We may voluntarily choose to make
additional contributions to the trust funds during 2010. The
contributions may be in the form of cash, company common stock
or a combination of both. Any contributions using company common
stock would require the approval of the companys Board
45
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
of Directors. Any contributions using company common stock would
be of a size so as to not result in the trust funds holding 5%
or more of the companys outstanding common stock at the
time of contribution.
Due to the widespread nature of disruption in financial markets,
in December 2008, the federal government passed legislation that
provides for temporary relief from the funding requirements
under the Pension Protection Act of 2006. Due to this
legislation, our minimum required pension contributions for 2010
are not significant. Nevertheless, if the relief provided by the
federal government is no longer applicable to our qualified
pension plan, or if there is downward pressure on the asset
values of the plan, or if the assets fail to recover in value,
or if the present value of the projected benefit obligation of
the plan increases, as would occur in the event of a decrease in
the discount rate used to measure the obligation, it would
necessitate significantly increased funding of the plan in the
future.
The table below summarizes the funded status of our sponsored
defined benefit plans;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
|
|
Qualified
|
|
|
Non-Qualified
|
|
|
Qualified
|
|
|
Non-Qualified
|
|
|
|
Plan
|
|
|
Plan
|
|
|
Plan
|
|
|
Plan
|
|
|
Projected benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
400,291
|
|
|
$
|
21,366
|
|
|
$
|
403,994
|
|
|
$
|
26,810
|
|
Service cost
|
|
|
2,306
|
|
|
|
2
|
|
|
|
3,196
|
|
|
|
344
|
|
Interest cost
|
|
|
24,681
|
|
|
|
1,258
|
|
|
|
24,318
|
|
|
|
1,422
|
|
Actuarial (gain) loss
|
|
|
17,029
|
|
|
|
548
|
|
|
|
(9,297
|
)
|
|
|
(4,806
|
)
|
Benefits paid
|
|
|
(23,402
|
)
|
|
|
(2,140
|
)
|
|
|
(21,954
|
)
|
|
|
(1,679
|
)
|
Curtailments
|
|
|
107
|
|
|
|
|
|
|
|
34
|
|
|
|
(725
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
$
|
421,013
|
|
|
$
|
21,034
|
|
|
$
|
400,291
|
|
|
$
|
21,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
284,376
|
|
|
$
|
|
|
|
$
|
380,743
|
|
|
$
|
|
|
Actual return on plan assets
|
|
|
44,551
|
|
|
|
|
|
|
|
(74,413
|
)
|
|
|
|
|
Employer contributions
|
|
|
|
|
|
|
2,140
|
|
|
|
|
|
|
|
1,679
|
|
Benefits paid
|
|
|
(23,402
|
)
|
|
|
(2,140
|
)
|
|
|
(21,954
|
)
|
|
|
(1,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
$
|
305,525
|
|
|
$
|
|
|
|
$
|
284,376
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued pension cost
|
|
$
|
115,488
|
|
|
$
|
21,034
|
|
|
$
|
115,915
|
|
|
$
|
21,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
420,732
|
|
|
$
|
21,034
|
|
|
$
|
399,372
|
|
|
$
|
21,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension expense for 2009, 2008, and 2007 included
the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Service cost-benefits earned during the period
|
|
$
|
2,308
|
|
|
$
|
3,539
|
|
|
$
|
4,498
|
|
Interest cost on the projected benefit obligation
|
|
|
25,939
|
|
|
|
25,740
|
|
|
|
25,228
|
|
Expected return on plan assets
|
|
|
(26,139
|
)
|
|
|
(27,610
|
)
|
|
|
(26,265
|
)
|
Net amortization and deferral
|
|
|
4,821
|
|
|
|
2,685
|
|
|
|
4,604
|
|
Curtailment (gain)/loss
|
|
|
109
|
|
|
|
(448
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension expense
|
|
$
|
7,038
|
|
|
$
|
3,906
|
|
|
$
|
8,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Annual cost for defined benefit plans is determined using the
projected unit credit actuarial method. Prior service cost is
amortized on a straight-line basis over the average remaining
service period of employees expected to receive benefits.
Changes in plan assets and benefit obligations recognized in
other comprehensive loss for 2009, 2008, and 2007 included the
following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Actuarial loss
|
|
$
|
493
|
|
|
$
|
89,413
|
|
|
$
|
149
|
|
Recognition of actuarial loss
|
|
|
(4,794
|
)
|
|
|
(2,631
|
)
|
|
|
(4,532
|
)
|
Recognition of prior service cost
|
|
|
(29
|
)
|
|
|
(296
|
)
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in other comprehensive loss
|
|
$
|
(4,330
|
)
|
|
$
|
86,486
|
|
|
$
|
(4,456
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss consists of the following components
related to defined benefit plans at December 31, 2009 and
2008:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Net actuarial loss
|
|
$
|
131,882
|
|
|
$
|
136,183
|
|
Prior service cost
|
|
|
94
|
|
|
|
123
|
|
Tax benefits
|
|
|
(19,536
|
)
|
|
|
(19,536
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
112,440
|
|
|
$
|
116,770
|
|
|
|
|
|
|
|
|
|
|
The estimated amounts that will be amortized from other
comprehensive loss into net periodic benefit cost in 2010 are:
|
|
|
|
|
Actuarial loss
|
|
$
|
7,453
|
|
Prior service cost
|
|
|
26
|
|
|
|
|
|
|
Total estimated amortization into net periodic benefit cost in
2010
|
|
$
|
7,479
|
|
|
|
|
|
|
Actuarial assumptions used to determine costs and benefit
obligations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Assumptions used to determine net pension expense for the year
ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected long-term rate of return on plan assets
|
|
|
7.50
|
%
|
|
|
7.50
|
%
|
|
|
7.50
|
%
|
Average discount rate
|
|
|
6.25
|
%
|
|
|
6.25
|
%
|
|
|
6.00
|
%
|
Long-term rate of compensation increase
|
|
|
1.50
|
%
|
|
|
3.50
|
%
|
|
|
3.50
|
%
|
Assumptions used to determine benefit obligation as of December
31:
|
|
|
|
|
|
|
|
|
|
|
|
|
Average discount rate
|
|
|
6.00
|
%
|
|
|
6.25
|
%
|
|
|
6.25
|
%
|
Long-term rate of compensation increase
|
|
|
1.50
|
%
|
|
|
1.50
|
%
|
|
|
3.50
|
%
|
The expected long-term rate of return on plan assets assumption
was developed through analysis of historical market returns and
trust fund returns by asset class, current market conditions,
and anticipated future long-term performance by asset class.
While consideration is given to recent asset performance, this
assumption represents a long-term, prospective return. The
average discount rate is selected based on yields of high
quality bonds with cash flows matching the timing and amount of
expected future benefit payments. The plans projected cash
flow is matched to a yield curve comprised of over 500 bonds
rated Aa by Moodys as of the measurement date. The
long-term rate of compensation increase is applicable for a
period of one year, as transition benefits will cease to
accumulate after 2010.
47
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The investment objective of the trust funds is to ensure, over
the long-term life of the plans, an adequate asset balance and
sufficient liquidity to support the benefit obligations to
participants, retirees, and beneficiaries. In meeting this
objective, we seek to achieve investment returns at or above
selected benchmarks consistent with a prudent level of
diversification between and within asset classes. We retain
registered investment advisors to manage specific asset classes.
Investment advisors are selected from established and
financially sound organizations with proven records in managing
funds in the appropriate asset class. Investment advisors are
given strict investment guidelines and performance benchmarks.
The assets of the various funds include domestic and
international corporate equities, government securities, and
corporate debt securities.
The asset allocations for our defined benefit plans are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Plan Assets
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
Target
|
|
|
2009
|
|
|
2008
|
|
|
Global equity securities
|
|
|
55
|
%
|
|
|
56
|
%
|
|
|
48
|
%
|
Fixed income securities
|
|
|
45
|
%
|
|
|
44
|
%
|
|
|
52
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset allocation studies are performed periodically to review
and establish asset class targets that satisfy the investment
objective of the trust funds. The asset allocation is monitored
and, if necessary, rebalanced at least semi-annually.
The table below summarizes the fair value of the plan assets,
presented by asset category and by level within the fair value
hierarchy. The level within the fair value hierarchy is
determined based on the inputs used to measure the fair value.
Level 1 includes fair value measurements based on quoted
prices in active markets for identical assets. Level 2
includes fair values estimated using significant other
observable inputs. Level 3 includes fair values estimated
using significant unobservable inputs. Level 2 investments
include fixed income securities that are valued using model
based pricing services and pooled funds that contain investments
with values based on quoted market prices, but for which the
funds are not valued on a quoted market basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Global equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic equities
|
|
$
|
146,698
|
|
|
$
|
146,698
|
|
|
$
|
|
|
|
$
|
|
|
International equities
|
|
|
25,461
|
|
|
|
25,461
|
|
|
|
|
|
|
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
11,693
|
|
|
|
|
|
|
|
11,693
|
|
|
|
|
|
Domestic corporate and agency bonds
|
|
|
56,752
|
|
|
|
|
|
|
|
56,752
|
|
|
|
|
|
International corporate and government bonds
|
|
|
1,068
|
|
|
|
|
|
|
|
1,068
|
|
|
|
|
|
Domestic government securities
|
|
|
63,853
|
|
|
|
|
|
|
|
63,853
|
|
|
|
|
|
Total fair value of plan assets
|
|
$
|
305,525
|
|
|
$
|
172,159
|
|
|
$
|
133,366
|
|
|
$
|
|
|
48
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At December 31, 2009, expected benefit payments to retirees
and beneficiaries are as follows.
|
|
|
|
|
Year
|
|
Amount
|
|
2010
|
|
$
|
26,738
|
|
2011
|
|
|
27,979
|
|
2012
|
|
|
29,272
|
|
2013
|
|
|
30,626
|
|
2014
|
|
|
32,056
|
|
2015 2019
|
|
$
|
184,398
|
|
Defined
Contribution Plan
We sponsor a defined contribution plan which covers all domestic
employees. Participating employees may contribute a percentage
of their compensation to the plan, subject to limitations
imposed by the Internal Revenue Service. We match a portion of
the employees contribution and employees vest immediately
in the company match.
|
|
11.
|
STOCK OPTIONS,
RESTRICTED STOCK, AND RESTRICTED STOCK UNITS
|
We have outstanding stock options, restricted stock, and
restricted stock units pursuant to the 1992 Stock Option Plan,
the 1999 Long-Term Incentive Plan, and the 2008 Incentive Plan.
These plans are administered by the Human Resources Committee of
the Board of Directors and permit certain key employees to be
granted nonqualified options, performance-based options,
restricted stock, restricted stock units, or combinations
thereof. Options must be issued at market value on the date of
grant and expire in a maximum of ten years. As of
December 31, 2009 there were 1,347,719 shares
available for grant. Shares issued upon exercise of stock
options or issuance of restricted shares may be new shares or
shares issued from treasury stock. For the year ended
December 31, 2009, a credit of $524 ($322 net of
income tax expense) was recorded to compensation expense for
stock incentive compensation plans. For the years ended
December 31, 2008 and 2007, compensation expense was $4,310
($2,694 net of income tax benefit), and $2,866
($1,824 net of income tax benefit), respectively.
Compensation expense presented net of income tax expense and
income tax benefit does not include the effect of valuation
allowances recorded during the periods (see
Note 13 Income Taxes).
A summary of option activity is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term (Years)
|
|
|
Value
|
|
|
Outstanding at December 31, 2008
|
|
|
3,610,692
|
|
|
$
|
20.54
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
365,500
|
|
|
|
4.88
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(903,475
|
)
|
|
|
22.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
3,072,717
|
|
|
$
|
18.06
|
|
|
|
5.4
|
|
|
$
|
209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2009
|
|
|
1,970,939
|
|
|
$
|
23.11
|
|
|
|
3.6
|
|
|
$
|
|
|
The aggregate intrinsic value was calculated using the
difference between the market price at year end and the exercise
price for only those options that have an exercise price that is
less than the market price.
49
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The fair value of each stock option is estimated on the date of
grant using the Black-Scholes option pricing model. The
following weighted-average assumptions were used to determine
the fair value of options granted in the years ended
December 31, 2009, 2008, and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Risk-free interest rate
|
|
|
2.3
|
%
|
|
|
2.6
|
%
|
|
|
4.9
|
%
|
Expected dividend yield
|
|
|
0.0
|
%
|
|
|
1.4
|
%
|
|
|
4.2
|
%
|
Expected life (in years)
|
|
|
4.1
|
|
|
|
5.1
|
|
|
|
6.0
|
|
Expected volatility
|
|
|
91.3
|
%
|
|
|
41.1
|
%
|
|
|
36.5
|
%
|
The risk-free interest rate is based upon U.S. Treasury
Securities with a term similar to the expected life of the
option grant. The dividend yield is calculated based upon the
dividend rate on the date of the grant. Expected life is equal
to the average expected term from the grant date until exercise.
Expected volatility is calculated based upon the historical
volatility over a period equal to the expected life of the
option grant.
Other information pertaining to option activity during the years
ended December 31, 2009, 2008, and 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Weighted average fair value per share of options granted
|
|
$
|
3.22
|
|
|
$
|
3.91
|
|
|
$
|
4.25
|
|
Total intrinsic value of stock options exercised
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,481
|
|
The fair value of the stock option and restricted stock awards
is recognized as compensation expense on a straight-line basis
over the vesting period, generally ranging from three to four
years for stock options and up to five years for restricted
stock.
A summary of non-vested restricted stock activity is presented
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Outstanding at December 31, 2008
|
|
|
451,501
|
|
|
$
|
12.61
|
|
Granted
|
|
|
83,275
|
|
|
|
3.81
|
|
Vested
|
|
|
(46,337
|
)
|
|
|
14.38
|
|
Forfeited
|
|
|
(290,886
|
)
|
|
|
11.93
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
197,553
|
|
|
$
|
9.48
|
|
|
|
|
|
|
|
|
|
|
The total fair value of restricted stock awards that vested
during the years ended December 31, 2009, 2008, and 2007,
was $172, $171, and $241, respectively.
As of December 31, 2009 there was $2,856 of total
unrecognized compensation cost related to non-vested stock
option and restricted stock awards outstanding under the plans.
This cost is expected to be recognized over a weighted-average
period of 1.9 years.
In December 2008, we awarded restricted stock units to certain
key employees and executive officers. The awards may only be
settled in cash. The awards are contingent on the achievement of
both the Companys share price objectives and service-based
retention periods. The awards expire five years from the grant
date and can vest at any time prior to expiration. If the
trailing 10 day average of our common stock reaches $6.26
per share, then 50% of the units will vest, and the participant
will be entitled to receive a cash payment of $6.26 per vested
unit on the second anniversary of the grant date, or if the
vesting date occurs after the second anniversary of the grant
date, on the vesting date. The other 50% of the units will
50
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
vest if the trailing 10 day average of our common stock
reaches $9.39 per share, and following vesting, the participant
will be entitled to receive a cash payment of $9.39 per vested
unit on the third anniversary of the grant date, or if the
vesting date occurs after the third anniversary of the grant
date, on the vesting date. The awards are designed to reward
participants for increases in share price as well as encouraging
the long-term employment of the participants.
On December 21, 2009, an additional 67,857 restricted stock
units were granted with the same vesting dates, expiration
dates, and other terms as the December 2008 grant.
A summary of restricted stock unit activity is presented below:
|
|
|
|
|
|
|
|
|
|
|
Units with
|
|
|
Units with
|
|
|
|
Share Price
|
|
|
Share Price
|
|
|
|
Objective of
|
|
|
Objective of
|
|
|
|
$6.26
|
|
|
$9.39
|
|
|
Outstanding at December 31, 2008
|
|
|
1,425,710
|
|
|
|
1,425,710
|
|
Granted
|
|
|
33,928
|
|
|
|
33,928
|
|
Vested
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(199,680
|
)
|
|
|
(199,680
|
)
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
1,259,958
|
|
|
|
1,259,958
|
|
|
|
|
|
|
|
|
|
|
Compensation expense of $3,722, $216, and $0 was recorded for
the years ended December 31, 2009, 2008, and 2007,
respectively, for restricted stock unit awards. Compensation
expense recorded in 2009 is attributable to performance during
the period and increases in the estimated fair value of the
awards, partially offset by forfeiture activity.
The fair value of the restricted stock unit awards is estimated
each quarter using binomial pricing models. The fair value of
the awards is recognized as compensation expense ratably over
the derived service periods. The remaining durations of the
derived service periods are 1.6 years and 2.1 years
for the awards with $6.26 and $9.39 share price objectives,
respectively. The following assumptions were used to determine
the fair value of the restricted stock units as of
December 31, 2009:
|
|
|
|
|
Risk-free interest rate
|
|
|
2.1
|
%
|
Expected dividend yield
|
|
|
0.0
|
%
|
Expected volatility
|
|
|
88.6
|
%
|
The risk-free interest rate is based upon U.S. Treasury
Securities with a term similar to that of the remaining term of
the grant. The dividend yield is calculated based upon the
dividend rate at December 31, 2009. Expected volatility is
calculated based upon the historical volatility over a period
equal to the remaining term of the grant.
The companys restated certificate of incorporation
includes authorization to issue up to 200 million shares of
Common Stock with a $1.00 per share stated value. As of
December 31, 2009, 56,482,541 shares of Common Stock
had been issued.
The company has periodically been authorized by its Board of
Directors to repurchase our Common Stock in open market or
privately negotiated transactions. Common Stock repurchases are
recorded as treasury stock and may be used for general corporate
purposes. On January 26, 2006 an authorization of $50,000
was approved. This authorization expired on January 26,
2007 with no shares having been purchased. We currently have no
authorization to repurchase shares of Common Stock.
51
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Weighted average shares used in the computation of basic and
diluted earnings (loss) per common share for 2009, 2008, and
2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Weighted average shares used for basic earnings (loss) per
common share
|
|
|
48,302,027
|
|
|
|
48,738,788
|
|
|
|
48,445,948
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used for diluted earnings (loss) per
common share
|
|
|
48,302,027
|
|
|
|
48,738,788
|
|
|
|
48,445,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluded from the computation of diluted earnings (loss) per
common share for 2009, 2008, and 2007 were options to purchase
3,072,717, 3,610,692, and 3,262,617 shares, respectively,
at an average price of $18.06, $20.54, and $23.25 per share,
respectively. These options have been excluded from the diluted
earnings (loss) per share calculation because their inclusion
would be antidilutive.
Effective August 3, 2009, our Board of Directors adopted a
Stockholders Rights Agreement (the Rights Agreement)
to reduce the risk of limitation of the Companys net
operating loss carry forwards and certain other tax benefits or
attributes under Section 382 of the Internal Revenue Code.
The Rights Agreement replaces the Companys prior
stockholders rights plan and reduces the threshold percentage of
beneficial ownership of the Companys common stock by any
person or group that would trigger the rights under the Rights
Agreement from 15% to 4.75% (an Acquiring Person),
with the exception of stockholders that currently own 4.75% or
more of the common stock would not be deemed to be an Acquiring
Person so long as they acquired no more than an additional 0.5%
of the common stock, up to a maximum of 15%. In addition, in its
discretion, the Board may exempt certain transactions and
certain persons whose acquisition of securities is determined by
the Board not to jeopardize the Companys net operating
loss carry forwards and whose holdings following such
acquisition will not equal or exceed 15% of the Companys
outstanding common stock.
In connection with the adoption of the Rights Agreement, the
Board of Directors declared a distribution of one right (a
Right) for each outstanding share of Common Stock,
no par value, of the Company (the Common Stock) to
the stockholders of record as of the close of business on
August 13, 2009, and for each share of Common Stock issued
by the Company thereafter and prior to the distribution date.
Each Right entitles the holder, subject to the terms of the
Rights Agreement, to purchase from the Company one
one-thousandth of a share (a Unit) of Series B
Junior Participating Preferred Stock, no par value
(Series B Preferred Stock), at a purchase price
of $20.00 per Unit, subject to adjustment (the Purchase
Price).
Effective February 26, 2010, our Board of Directors adopted
an Amended and Restated Stockholders Rights Agreement, which
amends and restates the Rights Agreement, to among other things
extend the final expiration date of the Rights to July 30,
2012 and to increase from 15% to 20% the maximum beneficial
ownership amount that certain exempt persons
(persons permitted to acquire beneficial ownership of the
companys outstanding shares of common stock above the
4.75% rights exercisability trigger), or persons that acquire
shares of the Companys common stock in exempt
transactions (transactions pursuant to which persons may
acquire beneficial ownership above the 4.75% rights
exercisability trigger), may acquire of the companys
outstanding common stock without triggering the exercisability
rights.
52
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Loss from continuing operations before income tax benefit:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States operations
|
|
$
|
168,429
|
|
|
$
|
411,558
|
|
|
$
|
80,074
|
|
Foreign operations
|
|
|
8,050
|
|
|
|
7,400
|
|
|
|
404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
176,479
|
|
|
$
|
418,958
|
|
|
$
|
80,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) from continuing operations is
comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(55,800
|
)
|
|
$
|
(50,186
|
)
|
|
$
|
(11,742
|
)
|
State and local
|
|
|
(3,467
|
)
|
|
|
(600
|
)
|
|
|
1,487
|
|
Foreign
|
|
|
493
|
|
|
|
539
|
|
|
|
1,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58,774
|
)
|
|
|
(50,247
|
)
|
|
|
(9,181
|
)
|
Deferred
|
|
|
(9,019
|
)
|
|
|
47,090
|
|
|
|
(20,080
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
|
|
$
|
(67,793
|
)
|
|
$
|
(3,157
|
)
|
|
$
|
(29,261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles the differences between the
United States federal corporate statutory rate and our effective
income tax rate for continuing operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Federal corporate statutory rate
|
|
|
(35.0
|
)%
|
|
|
(35.0
|
)%
|
|
|
(35.0
|
)%
|
State and local income taxes, net of federal tax benefit
|
|
|
(9.2
|
)
|
|
|
(1.0
|
)
|
|
|
(4.6
|
)
|
Foreign rate differential
|
|
|
2.1
|
|
|
|
0.6
|
|
|
|
0.8
|
|
Non-deductible goodwill
|
|
|
0.0
|
|
|
|
6.4
|
|
|
|
0.0
|
|
Valuation allowance
|
|
|
5.3
|
|
|
|
28.2
|
|
|
|
0.9
|
|
Other
|
|
|
(1.6
|
)
|
|
|
(0.0
|
)
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
(38.4
|
)%
|
|
|
(0.8
|
)%
|
|
|
(36.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The sources of the tax effects for temporary differences that
give rise to the deferred tax assets and liabilities were as
follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Deferred tax assets attributable to:
|
|
|
|
|
|
|
|
|
Expense accruals
|
|
$
|
60,619
|
|
|
$
|
70,392
|
|
Employee pension and other benefit plans
|
|
|
58,059
|
|
|
|
56,280
|
|
Property, plant, and equipment
|
|
|
3,240
|
|
|
|
9,550
|
|
Goodwill
|
|
|
5,884
|
|
|
|
9,057
|
|
Net operating loss and tax credit carry forward
|
|
|
38,320
|
|
|
|
23,180
|
|
Other
|
|
|
8,311
|
|
|
|
2,050
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
174,433
|
|
|
|
170,509
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities attributable to:
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
(27,023
|
)
|
|
|
(38,627
|
)
|
Inventory costs capitalized
|
|
|
(1,019
|
)
|
|
|
(2,993
|
)
|
Prepaid expenses
|
|
|
(2,153
|
)
|
|
|
(1,234
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(30,195
|
)
|
|
|
(42,854
|
)
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(169,975
|
)
|
|
|
(161,426
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(25,737
|
)
|
|
$
|
(33,771
|
)
|
|
|
|
|
|
|
|
|
|
At December 31, 2009 and 2008, $0 and $5,854 of deferred
tax liabilities are classified as current other accrued
expenses, respectively.
At December 31, 2008, we evaluated all significant
available positive and negative evidence, including the
existence of losses in recent years and our forecast of future
taxable income, and, as a result, determined it was more likely
than not that our federal and certain state deferred tax assets,
including benefits related to net operating loss carry forwards,
would not be realized based on the measurement standards
required under the ASC 740. The valuation allowance was
increased $156,572 to $161,426 in 2008. In the year ended
December 31, 2009, the valuation allowance was increased by
$8,549 to $169,975. The increase in the valuation allowance in
2009 is attributable to increases in net deferred tax assets,
driven by additional state net operating losses, requiring a
valuation allowance. The 2009 federal net operating losses did
not generate deferred tax assets requiring a valuation allowance
due to our ability to carry back 2009 losses for a period of
five years under the provisions of the Worker, Home Ownership
and Business Assistance Act of 2009 (H.R. 3548) which was
signed into law on November 6, 2009. Prior to this
legislation, the carry back was limited to a period of two
years. This additional carry back capacity resulted in the
recording of federal income tax refund receivable of $58,444 at
December 31, 2009. The amount of income tax refund
receivable at December 31, 2009 is based on estimates and
is subject to income tax return filing.
At December 31, 2009, the deferred tax assets attributable
to federal net operating loss carry forwards were $8,810, state
net operating loss carry forwards were $22,330, federal tax
credit carry forwards were $3,550, and state tax credit carry
forwards were $3,630. We evaluated all significant available
positive and negative evidence, including the existence of
losses in recent years and our forecast of future taxable
income, in assessing the need for a valuation allowance. The
federal losses begin to expire in the year 2028. The state
losses generally start to expire in the year 2021. While we have
no other limitations on the use of our net operating loss carry
forwards, we are potentially subject to limitations if a change
in control occurs pursuant to applicable statutory regulations.
54
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The undistributed cumulative earnings of foreign subsidiaries of
$11,890 at December 31, 2009 are considered permanently
reinvested outside the United States. It is impractical to
determine the amount of federal income taxes payable if these
earnings were repatriated.
We file income tax returns in the United States federal
jurisdiction and various state and foreign jurisdictions. With
few exceptions, we are no longer subject to United States
federal, state and local, or
non-U.S. income
tax examinations by tax authorities for years before 2004. The
Internal Revenue Service (IRS) commenced an
examination of our United States income tax return for 2005 in
the first quarter of 2007, limited scope examinations of our
United States income tax returns for 2006 and 2007 in the first
quarter of 2009, and a limited scope examination of our United
States income tax return for 2008 in the third quarter of 2009.
The company and the IRS have not agreed upon certain issues
which remain in the Appeals process.
Effective January 1, 2007 we adopted the provisions of FASB
Interpretation No. 48, Accounting for Uncertainty in
Income Taxes resulting in a decrease of $1,581 in the
liability for unrecognized tax benefits and an increase to the
January 1, 2007 retained earnings balance. A reconciliation
of the beginning and ending amount of unrecognized tax benefits
for the years ended December 31, 2009, 2008, and 2007 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Beginning balance January 1
|
|
$
|
10,297
|
|
|
$
|
9,559
|
|
|
$
|
12,697
|
|
Tax positions related to prior years
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
22
|
|
|
|
1,173
|
|
|
|
964
|
|
Reductions
|
|
|
(201
|
)
|
|
|
|
|
|
|
|
|
Tax positions related to current year
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
151
|
|
|
|
1,567
|
|
|
|
396
|
|
Reductions
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements
|
|
|
|
|
|
|
(419
|
)
|
|
|
(2,761
|
)
|
Lapses in statute of limitations
|
|
|
(1,968
|
)
|
|
|
(1,583
|
)
|
|
|
(1,737
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance December 31
|
|
$
|
8,301
|
|
|
$
|
10,297
|
|
|
$
|
9,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recognize interest and penalties related to unrecognized tax
benefits as a component of income tax expense. As of
December 31, 2009, 2008, and 2007, the liability for
unrecognized tax benefits included accrued interest of $3,227,
$3,182, $2,670 and accrued penalties of $968, $804, and $619,
respectively. We recognized interest expense of $1,101, $1,382,
and $311 and penalty expense of $163, $206, and $369 related to
unrecognized tax benefits in the statement of operations for the
years ended December 31, 2009, 2008, and 2007,
respectively. The total amount of unrecognized tax benefits at
December 31, 2009 that, if recognized, would affect the
effective tax rate is $6,658.
|
|
14.
|
OTHER LONG-TERM
LIABILITIES
|
Other long-term liabilities includes the non-current portion of
closed store lease liabilities, accrued workers compensation,
accrued rent associated with leases with escalating payments,
liabilities for unrecognized tax benefits, deferred compensation
and long-term incentive plans and various other non-current
liabilities.
55
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
15.
|
OTHER
COMPREHENSIVE INCOME (LOSS)
|
Other comprehensive income (loss) consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Pension liability
|
|
$
|
4,330
|
|
|
$
|
(86,486
|
)
|
|
$
|
4,456
|
|
Foreign currency translation
|
|
|
1,187
|
|
|
|
(4,391
|
)
|
|
|
3,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,517
|
|
|
|
(90,877
|
)
|
|
|
7,895
|
|
Income tax expense (benefit)
|
|
|
|
|
|
|
(854
|
)
|
|
|
1,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,517
|
|
|
$
|
(90,023
|
)
|
|
$
|
6,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of accumulated other comprehensive loss,
presented net of tax, are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Pension liability
|
|
$
|
(112,440
|
)
|
|
$
|
(116,770
|
)
|
Foreign currency translation
|
|
|
969
|
|
|
|
(218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(111,471
|
)
|
|
$
|
(116,988
|
)
|
|
|
|
|
|
|
|
|
|
Certain of our real properties and equipment are operated under
lease agreements. Rental expense under operating leases was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Rent expense
|
|
$
|
77,956
|
|
|
$
|
91,433
|
|
|
$
|
71,046
|
|
Sublease income
|
|
|
(7,547
|
)
|
|
|
(8,692
|
)
|
|
|
(13,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net rent expense
|
|
$
|
70,409
|
|
|
$
|
82,741
|
|
|
$
|
57,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in rent expense for 2009, 2008, and 2007 were closed
store lease charges of $7,537, $23,158, and $7,217.
Annual minimum payments under operating leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
Minimum
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Lease
|
|
|
Lease
|
|
|
Minimum
|
|
|
|
|
|
Net Minimum
|
|
|
|
Payments
|
|
|
Payments
|
|
|
Lease
|
|
|
Sublease
|
|
|
Lease
|
|
Year
|
|
Open Facilities
|
|
|
Closed Stores
|
|
|
Payments
|
|
|
Income
|
|
|
Payments
|
|
|
2010
|
|
$
|
47,403
|
|
|
$
|
9,328
|
|
|
$
|
56,731
|
|
|
$
|
5,473
|
|
|
$
|
51,258
|
|
2011
|
|
|
40,547
|
|
|
|
8,473
|
|
|
|
49,020
|
|
|
|
5,256
|
|
|
|
43,764
|
|
2012
|
|
|
34,812
|
|
|
|
8,048
|
|
|
|
42,860
|
|
|
|
4,984
|
|
|
|
37,876
|
|
2013
|
|
|
25,726
|
|
|
|
7,940
|
|
|
|
33,666
|
|
|
|
3,616
|
|
|
|
30,050
|
|
2014
|
|
|
19,753
|
|
|
|
6,827
|
|
|
|
26,580
|
|
|
|
2,563
|
|
|
|
24,017
|
|
thereafter
|
|
|
35,370
|
|
|
|
5,111
|
|
|
|
40,481
|
|
|
|
897
|
|
|
|
39,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
203,611
|
|
|
$
|
45,727
|
|
|
$
|
249,338
|
|
|
$
|
22,789
|
|
|
$
|
226,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We are the prime tenant on operating leases that we have
subleased to independent furniture dealers. In addition, we
guarantee leases of company-brand stores operated by independent
furniture dealers and guarantee leases of tractors and trailers
operated by an independent transportation company. These
subleases and guarantees have remaining terms ranging up to six
years and generally require us to make lease payments in the
event of default by the sublessor or independent party. In the
event of default, we have the right to assign or assume the
lease. As of December 31, 2009, the total future payments
under lease guarantees were $16,290, which are not included in
the table above, and total minimum payments under subleases were
$22,789. We considered certain of these independent parties with
lease guarantees to be at risk of default and we recorded a
lease termination liability of $613 to cover estimated losses on
these guaranteed leases.
|
|
17.
|
CONTINGENT
LIABILITIES
|
We are involved, from time to time, in litigation and other
legal proceedings incidental to our business. Management
believes that the outcome of current litigation and legal
proceedings will not have a material adverse effect upon our
results of operations or financial condition. However,
managements assessment of our current litigation and other
legal proceedings could change in light of the discovery of
facts with respect to legal actions or other proceedings pending
against us not presently known to us or determinations by
judges, juries or other finders of fact which are not in
accordance with managements evaluation of the probable
liability or outcome of such litigation or proceedings.
We are also involved in various claims relating to environmental
matters at a number of current and former plant sites. We engage
or participate in remedial and other environmental compliance
activities at certain of these sites. At other sites, we have
been named as a potentially responsible party under federal and
state environmental laws for site remediation. Management
analyzes each individual site, considering the number of parties
involved, the level of our potential liability or contribution
relative to the other parties, the nature and magnitude of the
hazardous wastes involved, the method and extent of remediation,
the potential insurance coverage, the estimated legal and
consulting expense with respect to each site and the time period
over which any costs would likely be incurred. Based on the
above analysis, management believes at the present time that any
claims, penalties or costs incurred in connection with known
environmental matters will not reasonably likely have a material
adverse effect upon our consolidated financial position or
results of operations. However, managements assessment of
our current claims could change in light of the discovery of
facts with respect to environmental sites, which are not in
accordance with managements evaluation of the probable
liability or outcome of such claims.
We offer limited warranties on certain products. In addition, we
accept returns of defective product. Our accounting policy is to
accrue an estimated liability for these warranties and returns
at the time revenue is recognized. This estimate is based upon
historical warranty costs and returns and is adjusted for any
warranty or return issues known at period end. The warranty and
returns reserve is included partially as a valuation allowance
against accounts receivable and partially as an accrued expense.
The following table summarizes reserve for warranty and returns
activity for the years ended December 31, 2009, 2008, and
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Beginning balance
|
|
$
|
10,662
|
|
|
$
|
11,024
|
|
|
$
|
10,334
|
|
Additions to reserves
|
|
|
10,777
|
|
|
|
19,014
|
|
|
|
26,797
|
|
Deductions from reserves
|
|
|
15,977
|
|
|
|
19,376
|
|
|
|
26,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
5,462
|
|
|
$
|
10,662
|
|
|
$
|
11,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Other income, net consists of the following for the years ended
December 31, 2009, 2008, and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Interest income
|
|
$
|
1,982
|
|
|
$
|
2,845
|
|
|
$
|
3,686
|
|
Gain on termination of hedge accounting
|
|
|
|
|
|
|
|
|
|
|
4,094
|
|
Other, net
|
|
|
(433
|
)
|
|
|
2,580
|
|
|
|
2,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,549
|
|
|
$
|
5,425
|
|
|
$
|
10,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19.
|
DISCONTINUED
OPERATIONS
|
On October 16, 2007, we announced our intent to divest
Hickory Business Furniture (HBF), a wholly-owned subsidiary that
designs and manufactures business furniture. This business unit
is reflected as a discontinued operation pursuant to the
provisions of ASC 205 20 Discontinued
Operations.
On March 29, 2008, we closed the sale of HBF for $75,000
resulting in a gain of $28,868, which is net of income tax
expense of $19,247.
Operating results for the discontinued operations are as follows
for the years ended December 31, 2009, 2008, and
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net sales
|
|
$
|
|
|
|
$
|
15,348
|
|
|
$
|
63,606
|
|
Earnings before income tax expense
|
|
|
|
|
|
|
1,734
|
|
|
|
9,086
|
|
Net earnings
|
|
$
|
|
|
|
$
|
1,052
|
|
|
$
|
5,568
|
|
We had two material changes in estimates during 2009 related to
changes in inventory valuation allowances and changes in the
accrual for lease termination costs. The inventory valuation
allowances were increased by $32,981 due to our decision to
accelerate the disposal of slow moving inventory and the accrual
for closed store lease liabilities was increased by $7,537 due
to deteriorating market conditions for commercial leases.
We had three material changes in estimates during 2008 related
to changes in inventory valuation allowances, changes in the
allowances for doubtful accounts, and changes in the accrual for
lease termination costs. The inventory valuation allowances were
increased by $39,800, the allowance for doubtful accounts was
increased by $35,241, and the accrual for closed store lease
liabilities was increased by $23,158. The increases in estimates
were required due to deteriorating economic conditions and our
decision to accelerate the disposal of slow moving inventory.
In 2007, we had increased charges of $13,600 in the allowance
for doubtful accounts and $7,217 for closed store lease
liabilities.
|
|
21.
|
RECENTLY ISSUED
STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
|
In September 2006, the FASB issued a new standard for fair value
measurements which defines fair value, establishes a framework
for measuring fair value in U.S. GAAP, and expands the
disclosure requirements regarding fair value measurements. The
standard does not introduce new requirements mandating the use
of fair value. The standard defines fair value as the
price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date. The definition is
based on an exit price rather than an entry price, regardless of
58
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
whether the entity plans to hold or sell the asset. The standard
is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods
within those fiscal years. The required transition date for this
standard was delayed until fiscal years beginning after
November 15, 2008 for non-financial assets and liabilities,
except for those that are recognized or disclosed at fair value
in the financial statements on a recurring basis. The adoption
on January 1, 2008 of the portion of the standard that was
not delayed until fiscal years beginning after November 15,
2008 did not have a material effect on our financial position or
results of operations. The adoption of the remaining provisions
of the standard on January 1, 2009 did not have a material
effect on our financial position or results of operations.
In December 2007, the FASB issued a new standard for business
combinations that requires an acquiring entity to recognize all
the assets acquired and liabilities assumed in a transaction at
the acquisition-date fair value with limited exceptions. This
standard applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after
December 15, 2008. We adopted the provisions of this
standard on January 1, 2009. The adoption of this standard
did not affect our financial position or results of operations.
In December 2007, the FASB issued a new standard for
noncontrolling interests in consolidated financial statements.
This standard establishes new accounting and reporting
requirements for the noncontrolling interest in a subsidiary and
for the deconsolidation of a subsidiary. This standard is
effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008. The
adoption of this standard on January 1, 2009 did not affect
our financial position or results of operations.
In December 2008, the FASB issued a new standard on
employers disclosures about postretirement benefit plan
assets. This standard enhances the required disclosures related
to postretirement benefit plan assets including disclosures
concerning a companys investment policies for benefit plan
assets, categories of plan assets, fair value measurements of
plan assets, and concentrations of risk within plan assets. This
standard is effective for fiscal years ending after
December 15, 2009 and the disclosures about plan assets
required by this standard are incorporated in Note 10
Employee Benefits. The adoption of this standard did not affect
our financial position or results of operations.
In June 2009, the FASB issued Statement of Financial Accounting
Standards No. 168 (SFAS 168), The FASB
Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles, a replacement of FASB
Statement No. 162. SFAS 168 establishes the FASB
Accounting Standards Codification (the Codification)
as the source of authoritative U.S. GAAP recognized by the
FASB to be applied by nongovernmental entities. Rules and
interpretive releases of the Securities and Exchange Commission
(SEC) under authority of federal securities laws are
also sources of authoritative U.S. GAAP for SEC
registrants. The codification does not replace or affect
guidance issued by the SEC. The adoption of SFAS 168 did
not affect our financial position or results of operations.
|
|
22.
|
CORRECTION OF
IMMATERIAL ERRORS
|
In the third and fourth quarters of 2009, we recorded
adjustments to correct immaterial errors from prior periods that
increased selling, general and administrative expenses by
$11,849. Of the adjustments, $9,626 primarily related to certain
international tax and trade compliance matters. The underlying
matters and errors were detected through our transition of
certain international tax and trade compliance procedures to a
centralized shared services organization. The remaining
adjustments of $2,223 related to incorrect unemployment tax
calculations in a single state jurisdiction. The respective
state brought this matter to our attention and we finalized a
settlement agreement in the fourth quarter of 2009. These errors
have accumulated since 2002. We concluded that the impact of the
adjustments on the current and prior periods was not material.
59
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
23.
|
QUARTERLY
FINANCIAL INFORMATION (UNAUDITED)
|
Following is a summary of unaudited quarterly information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth
|
|
|
Third
|
|
|
Second
|
|
|
First
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Year ended December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
285,574
|
|
|
$
|
293,662
|
|
|
$
|
288,263
|
|
|
$
|
356,871
|
|
Gross profit
|
|
|
20,289
|
|
|
|
67,742
|
|
|
|
61,628
|
|
|
|
80,341
|
|
Net earnings/(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(64,981
|
)
|
|
$
|
(23,536
|
)
|
|
$
|
(15,993
|
)
|
|
$
|
(4,176
|
)
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(64,981
|
)
|
|
$
|
(23,536
|
)
|
|
$
|
(15,993
|
)
|
|
$
|
(4,176
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) per common share Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(1.35
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.09
|
)
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(1.35
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Common stock price range:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
5.70
|
|
|
$
|
6.04
|
|
|
$
|
4.44
|
|
|
$
|
2.99
|
|
Low
|
|
$
|
3.61
|
|
|
$
|
2.47
|
|
|
$
|
1.54
|
|
|
$
|
0.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
403,353
|
|
|
$
|
412,753
|
|
|
$
|
449,870
|
|
|
$
|
477,200
|
|
Gross profit
|
|
|
36,044
|
|
|
|
67,122
|
|
|
|
100,350
|
|
|
|
111,019
|
|
Net earnings/(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(353,832
|
)
|
|
$
|
(41,721
|
)
|
|
$
|
(23,996
|
)
|
|
$
|
3,748
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
52
|
|
|
|
29,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(353,832
|
)
|
|
$
|
(41,721
|
)
|
|
$
|
(23,944
|
)
|
|
$
|
33,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) per common share Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(7.25
|
)
|
|
$
|
(0.86
|
)
|
|
$
|
(0.49
|
)
|
|
$
|
0.08
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(7.25
|
)
|
|
$
|
(0.86
|
)
|
|
$
|
(0.49
|
)
|
|
$
|
0.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
|
$
|
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
Common stock price range:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
11.24
|
|
|
$
|
13.61
|
|
|
$
|
15.46
|
|
|
$
|
13.64
|
|
Low
|
|
$
|
1.66
|
|
|
$
|
8.48
|
|
|
$
|
11.80
|
|
|
$
|
6.82
|
|
Earnings (loss) per common share were computed independently for
each of the quarters presented. The sum of the quarters may not
equal the total year amount due to the impact of computing
average quarterly shares outstanding for each period.
The closing market price of the Common Stock on
December 31, 2009 was $5.46 per share.
60
FURNITURE BRANDS
INTERNATIONAL, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In the fourth quarters of 2009 and 2008, we recorded the
following charges and costs in our results of continuing
operations:
|
|
|
|
|
We incurred costs of $4,124 in 2009, reduced from $7,480 in
2008, related to downtime in our factories.
|
|
|
|
We incurred expense of $10,725 in 2009, reduced from $16,572 in
2008, which related primarily to occupancy costs, lease
termination costs, and lease liabilities of retail stores that
we ultimately closed.
|
|
|
|
We incurred charges of $3,608 in 2009, reduced from $10,500 in
2008, related to accounts receivable.
|
|
|
|
We incurred charges of $32,981 in 2009 and $24,200 in 2008 to
reduce the carrying value of inventory to market value, which
was driven by our efforts to accelerate the sale of slow-moving
inventory.
|
|
|
|
We incurred charges of $4,877 in 2009 and $11,345 in 2008
related to severance actions, which in 2009 related to
reductions of approximately 200 employees. These reductions
related to direct labor employees and indirect support employees
in our manufacturing facilities and employees in our
administrative offices.
|
|
|
|
We incurred costs and charges of $2,950 in 2009, reduced from
$16,515 in 2008, associated with facility closures and related
impairment charges on idle facilities.
|
|
|
|
We incurred charges of $39,050 in 2009 and $201,951 in 2008
related to impairment of our intangible assets. The 2009 charge
was primarily driven by increases in the discount rate used to
value our trade names.
|
|
|
|
We recorded an adjustment to correct immaterial errors from
prior periods that increased selling, general and administrative
expenses by $10,479 in 2009. We concluded that the impact on the
current and prior periods was not material. See Note 22.
Correction of Immaterial Errors for further information.
|
|
|
|
In 2008, we recorded a valuation allowance on our deferred tax
assets of $153,630, of which $115,026 was charged to income tax
expense.
|
|
|
|
In 2009, we recorded income tax benefit of $69,969, $58,444 of
which resulted from our ability to carry back 2009 losses for a
period of five years under the provisions of the Worker, Home
Ownership and Business Assistance Act of 2009 which was signed
into law on November 6, 2009. At December 31, 2009, we
also have net operating loss carry forwards that may be applied
against future taxable income, subject to certain limitations.
|
All of these charges, costs, and benefits contributed to our net
loss from continuing operations of $64,981 in the fourth quarter
of 2009 and our net loss from continuing operations of $353,832
in the fourth quarter of 2008.
61
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Furniture Brands International, Inc.:
We have audited Furniture Brands International, Inc.s
internal control over financial reporting as of
December 31, 2009, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Furniture Brands International, Inc.s
management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting,
included in the accompanying Managements Report on
Internal Control Over Financial Reporting. Our responsibility is
to express an opinion on the Companys internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our
opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Furniture Brands International, Inc. maintained,
in all material respects, effective internal control over
financial reporting as of December 31, 2009, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Furniture Brands International,
Inc. as of December 31, 2009 and 2008, and the related
consolidated statements of operations, cash flows, and
shareholders equity and comprehensive income (loss) for
each of the years in the three-year period ended
December 31, 2009, and our report dated March 2, 2010
expressed an unqualified opinion on those consolidated financial
statements.
St. Louis, Missouri
March 2, 2010
62
|
|
Item 9.
|
Changes
in and Disagreements With Accountants on Accounting and
Financial Disclosure
|
None
|
|
Item 9A.
|
Controls
and Procedures
|
|
|
(a)
|
Managements
Report on Internal Control over Financial Reporting
|
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as defined
in Exchange Act
Rule 13a-15(f)
under the Securities Exchange Act of 1934, as amended (the
Exchange Act). Our management, including our Chief
Executive Officer and Chief Financial Officer, conducted an
evaluation of the effectiveness of our internal control over
financial reporting as of December 31, 2009. In making this
assessment, our management used the criteria established in
Internal Control Integrated Framework, issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
Internal control over financial reporting is a process designed
by, or under the supervision of, the companys principal
executive and principal financial officers, or persons
performing similar functions, and effected by the companys
board of directors, management, and other personnel, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures
that:
(1) Pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company;
(2) Provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and
(3) Provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition
of the companys assets that could have a material effect
on the financial statements.
Because of inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Based on the evaluation of the Companys disclosure
controls and procedures as of December 31, 2009, the
Companys Chief Executive Officer and Chief Financial
Officer concluded that, as of such date, the Companys
disclosure controls and procedures were effective at the
reasonable assurance level.
The effectiveness of the Companys internal control over
financial reporting as of December 31, 2009, has been
audited by KPMG, LLP, an independent registered public
accounting firm, as stated in their report in Part II,
Item 8 of this
Form 10-K.
|
|
(b)
|
Changes in
Internal Control over Financial Reporting
|
In the first and second quarters of 2009, we designed and began
implementing procedures to remediate the material weakness
previously reported in our Annual Report on
Form 10-K
filed with the SEC on March 2, 2009. These procedures
include capturing a complete list, segregated by U.S. and
foreign tax jurisdictions, of all gross deferred income tax
assets subject to a valuation allowance and providing this list
to those responsible for evaluating the accounting implications.
Certain of these procedures are performed on a quarterly basis
while others are performed only on an annual basis. The
quarterly procedures were fully implemented in the second
quarter of 2009 and the annual procedures
63
were fully implemented in the fourth quarter of 2009. We tested
the effectiveness of these new procedures in the fourth quarter
of 2009 and determined that the controls were designed and
operating effectively. Other than those changes, there have not
been any other changes in our internal control over financial
reporting during the quarter ended December 31, 2009 that
have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
|
|
(c)
|
Evaluation of
Disclosure Controls and Procedures
|
Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the
effectiveness of our disclosure controls and procedures, as such
terms are defined in
Rules 13a-15(e)
and
15d-15(e)
promulgated under the Securities Exchange Act of 1934 (the
Exchange Act), as of December 31, 2009, the end
of the period covered by this Annual Report on
Form 10-K.
Disclosure controls and procedures are controls and procedures
designed to ensure that information required to be disclosed in
our reports filed under the Exchange Act, such as this report,
is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms. Disclosure
controls are also designed to ensure that such information is
accumulated and communicated to management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate to
allow timely decisions regarding required disclosure. Our
management, including our Chief Executive Officer and our Chief
Financial Officer concluded that our disclosure controls and
procedures were effective as of December 31, 2009.
|
|
Item 9B.
|
Other
Information
|
None
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
The information required by this Item 10 (Directors,
Executive Officers and Corporate Governance) is incorporated
herein by reference from the information to be contained in our
2010 Proxy Statement to be filed with the U.S. Securities
and Exchange Commission (SEC) in connection with the
solicitation of proxies for our 2010 Annual Meeting of
Stockholders (the 2010 Proxy Statement). The 2010
Proxy Statement will be filed within 120 days after the
close of the year ended December 31, 2009. The information
under the heading Executive Officers in Part I,
Item 1 of this
Form 10-K
is also incorporated by reference in this section.
The Furniture Brands International, Inc. Code of Corporate
Conduct is our code of ethics document applicable to all
employees, including all officers and directors. The code
incorporates our guidelines designed to deter wrongdoing and to
promote honest and ethical conduct; full, fair, accurate and
timely disclosure in SEC filings; and compliance with applicable
laws and regulations. The full text of our code is published on
our Investor Relations website at
www.furniturebrands.com. We intend to disclose future
amendments to certain provisions of our code, or waivers of such
provisions granted to executive officers and directors, on this
website within four business days following the date of such
amendment or waiver.
|
|
Item 11.
|
Executive
Compensation
|
The information required by this Item 11 (Executive
Compensation) of
Form 10-K
will be included in the 2010 Proxy Statement. The 2010 Proxy
Statement will be filed within 120 days after the close of
the year ended December 31, 2009, and such information is
incorporated herein by reference.
64
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholders Matters
|
The information required by this Item 12, including the
information required under the heading Equity Compensation
Plan Information, will be included in the 2010 Proxy
Statement. The 2010 Proxy Statement will be filed within
120 days after the close of the year ended
December 31, 2009, and such information is incorporated
herein by reference.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The information required by this Item 13 will be included
in the 2010 Proxy Statement. The 2010 Proxy Statement will be
filed within 120 days after the close of the year ended
December 31, 2009, and such information is incorporated
herein by reference.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The information required by this Item 14 will be included
in the 2010 Proxy Statement. The 2010 Proxy Statement will be
filed within 120 days after the close of the year ended
December 31, 2009, and such information is incorporated
herein by reference.
65
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
(a) List of documents filed as part of this report:
1. Financial Statements:
Consolidated balance sheets, December 31, 2009 and 2008
Consolidated statements of operations for each of the years in
the three-year period ended December 31, 2009
Consolidated statements of cash flows for each of the years in
the three-year period ended December 31, 2009
Consolidated statements of shareholders equity and
comprehensive income (loss) for each of the years in the
three-year period ended December 31, 2009
Notes to consolidated financial statements
Report of Independent Registered Public Accounting Firm
2. Financial Statement Schedules:
Valuation and qualifying accounts (Schedule II).
All other schedules are omitted as the required information is
presented in the consolidated financial statements or related
notes or are not applicable.
3. Exhibits:
The exhibits listed in the accompanying exhibit index are filed
or are incorporated by reference as part of this
Form 10-K.
66
Schedule II
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Charged to
|
|
|
Deductions
|
|
|
Balance at
|
|
|
|
Beginning
|
|
|
Costs and
|
|
|
From
|
|
|
End of
|
|
Description
|
|
of Period
|
|
|
Expenses
|
|
|
Reserves
|
|
|
Period
|
|
|
|
(Dollars in Thousands)
|
|
|
Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowances deducted from receivables on balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
27,074
|
|
|
$
|
9,424
|
|
|
$
|
(14,807
|
)
|
|
$
|
21,691
|
|
Allowance for cash discounts/ chargebacks/other
|
|
|
7,298
|
|
|
|
14,288
|
|
|
|
(17,052
|
)
|
|
|
4,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
34,372
|
|
|
$
|
23,712
|
|
|
$
|
(31,859
|
)
|
|
$
|
26,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowances deducted from receivables on balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
36,645
|
|
|
$
|
40,819
|
|
|
$
|
(50,390
|
)
|
|
$
|
27,074
|
|
Allowance for cash discounts/ chargebacks/other
|
|
|
8,822
|
|
|
|
19,235
|
|
|
|
(20,759
|
)
|
|
|
7,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
45,467
|
|
|
$
|
60,054
|
|
|
$
|
(71,149
|
)
|
|
$
|
34,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowances deducted from receivables on balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
21,595
|
|
|
$
|
24,994
|
|
|
$
|
(9,944
|
)
|
|
$
|
36,645
|
|
Allowance for cash discounts/ chargebacks/other
|
|
|
7,430
|
|
|
|
26,715
|
|
|
|
(25,323
|
)
|
|
|
8,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,025
|
|
|
$
|
51,709
|
|
|
$
|
35,267
|
|
|
$
|
45,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) 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.
|
|
|
|
|
|
By: /s/ Ralph
P.
Scozzafava Ralph
P. Scozzafava
|
Date: March 2, 2010
|
|
Chairman of the Board and Chief Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Ralph
P. Scozzafava
Ralph
P. Scozzafava
|
|
Chairman of the Board, Chief Executive Officer and Director
(Principal Executive Officer )
|
|
March 2, 2010
|
|
|
|
|
|
/s/ Steven
G. Rolls
Steven
G. Rolls
|
|
Chief Financial Officer
(Principal Financial Officer)
|
|
March 2, 2010
|
|
|
|
|
|
/s/ Richard
R. Isaak
Richard
R. Isaak
|
|
Controller
(Principal Accounting Officer)
|
|
March 2, 2010
|
|
|
|
|
|
/s/ Wilbert
G. Holliman, Jr.
Wilbert
G. Holliman, Jr.
|
|
Director
|
|
March 2, 2010
|
|
|
|
|
|
/s/ John
R. Jordan, Jr.
John
R. Jordan, Jr.
|
|
Director
|
|
March 2, 2010
|
|
|
|
|
|
/s/ Ira
D. Kaplan
Ira
D. Kaplan
|
|
Director
|
|
March 2, 2010
|
|
|
|
|
|
/s/ Bobby
L. Martin
Bobby
L. Martin
|
|
Director
|
|
March 2, 2010
|
|
|
|
|
|
/s/ Maureen
A. McGuire
Maureen
A. McGuire
|
|
Director
|
|
March 2, 2010
|
|
|
|
|
|
/s/ Aubrey
B. Patterson
Aubrey
B. Patterson
|
|
Director
|
|
March 2, 2010
|
|
|
|
|
|
/s/ Alan
G. Schwartz
Alan
G. Schwartz
|
|
Director
|
|
March 2, 2010
|
68
EXHIBIT INDEX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated
|
|
|
|
|
Filed with
|
|
|
|
by Reference
|
Exhibit
|
|
|
|
the Form
|
|
|
|
Filing Date with
|
|
Exhibit
|
Index No.
|
|
Exhibit Description
|
|
10-K
|
|
Form
|
|
the SEC
|
|
No.
|
|
|
3
|
.1
|
|
Restated Certificate of Incorporation of the Company, as amended
|
|
|
|
10-Q
|
|
May 14, 2002
|
|
3
|
|
3
|
.2
|
|
By-Laws of the Company, as amended effective as of August 7, 2008
|
|
|
|
8-K
|
|
August 13, 2008
|
|
3.1
|
|
3
|
.3
|
|
Certificate of Designation Series B Junior Participating
Preferred Stock of the Company
|
|
|
|
8-K
|
|
August 4, 2009
|
|
3.1
|
|
4
|
.1
|
|
Stockholder Rights Agreement, dated as of August 3, 2009,
between the Company and American Stock Transfer and Trust
Company, LLC, as Rights Agent
|
|
|
|
8-K
|
|
August 4, 2009
|
|
4.1
|
|
10
|
.1*
|
|
1992 Stock Option Plan, as amended
|
|
|
|
10-Q
|
|
May 12, 1999
|
|
10(a)
|
|
10
|
.2*
|
|
1999 Long-Term Incentive Plan, as amended
|
|
|
|
S-8
|
|
September 27, 2002
|
|
4(f)
|
|
10
|
.3*
|
|
2005 Long-Term Performance Bonus Plan
|
|
|
|
8-K
|
|
May 3, 2005
|
|
10(a)
|
|
10
|
.4*
|
|
Form of Stock Option Grant Letter
|
|
|
|
8-K
|
|
February 2, 2005
|
|
10(b)
|
|
10
|
.5*
|
|
Form of Restricted Stock Grant Letter
|
|
|
|
8-K
|
|
February 11, 2005
|
|
10(c)
|
|
10
|
.6*
|
|
2008 Incentive Plan
|
|
|
|
S-8
|
|
December 19, 2008
|
|
4.1
|
|
10
|
.7*
|
|
Form of Restricted Stock Unit Agreement under the 2008 Incentive
Plan
|
|
|
|
8-K
|
|
December 22, 2008
|
|
10.1
|
|
10
|
.8*
|
|
Form of Restricted Stock Award Agreement under the 2008
Incentive Plan
|
|
|
|
10-Q
|
|
May 8, 2009
|
|
10.4
|
|
10
|
.9*
|
|
Form of Nonqualified Stock Option Agreement under the 2008
Incentive Plan
|
|
|
|
10-Q
|
|
May 8, 2009
|
|
10.5
|
|
10
|
.10*
|
|
Form of Performance Based Restricted Stock Award Agreement under
the 2008 Incentive Plan
|
|
|
|
10-Q
|
|
May 8, 2009
|
|
10.6
|
|
10
|
.11*
|
|
Form of Indemnification Agreement between the Company and the
Companys directors
|
|
|
|
10-Q
|
|
August 7, 2009
|
|
10.1
|
|
10
|
.12*
|
|
Amended and Restated Restricted Stock Plan for Outside
Directors, dated as of May 7, 2009
|
|
|
|
10-Q
|
|
August 7, 2009
|
|
10.2
|
|
10
|
.13*
|
|
Employment Agreement dated June 14, 2007 between the Company and
Ralph P. Scozzafava
|
|
|
|
8-K
|
|
June 18, 2007
|
|
10.1
|
|
10
|
.14*
|
|
Amendment to Executive Employment Agreement between the Company
and Ralph P. Scozzafava, effective as of June 18, 2007
|
|
|
|
8-K
|
|
May 7, 2008
|
|
10.3
|
|
10
|
.15*
|
|
Form of Change of Control Agreement
|
|
|
|
8-K
|
|
June 26, 2007
|
|
10.1
|
|
10
|
.16*
|
|
Furniture Brands International, Inc. Executive Severance Plan
|
|
|
|
8-K
|
|
June 27, 2007
|
|
10.1
|
|
10
|
.17*
|
|
Form of Amendment to the Furniture Brands International, Inc.
Executive Severance Plan
|
|
|
|
8-K
|
|
May 7, 2008
|
|
10.6
|
|
10
|
.18*
|
|
Furniture Brands Supplemental Executive Retirement Plan, dated
as of January 1, 2002
|
|
|
|
10-K
|
|
March 25, 2003
|
|
10(v)
|
|
10
|
.19*
|
|
First Amendment to the Furniture Brands Supplemental Executive
Retirement Plan, effective December 31, 2005
|
|
|
|
10-Q
|
|
May 8, 2009
|
|
10.1
|
|
10
|
.20*
|
|
Second Amendment to the Furniture Brands Supplemental Executive
Retirement Plan, effective January 1, 2005
|
|
|
|
10-Q
|
|
May 8, 2009
|
|
10.2
|
|
10
|
.21*
|
|
Third Amendment to the Furniture Brands Supplemental Executive
Retirement Plan, effective March 14, 2008
|
|
|
|
10-Q
|
|
May 8, 2009
|
|
10.3
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated
|
|
|
|
|
Filed with
|
|
|
|
by Reference
|
Exhibit
|
|
|
|
the Form
|
|
|
|
Filing Date with
|
|
Exhibit
|
Index No.
|
|
Exhibit Description
|
|
10-K
|
|
Form
|
|
the SEC
|
|
No.
|
|
|
10
|
.22*
|
|
Deferred Compensation Plan, effective January 1, 2006
|
|
|
|
S-8
|
|
December 14, 2005
|
|
4.1
|
|
10
|
.23*
|
|
Amendment to Deferred Compensation Plan effective
December 31, 2008
|
|
|
|
10-K
|
|
March 2, 2009
|
|
10.23
|
|
10
|
.24*
|
|
Agreement between W.G. Holliman and the Company dated as of
June 23, 2008
|
|
X
|
|
|
|
|
|
|
|
10
|
.25
|
|
Credit Agreement, dated August 9, 2007, among the Company,
Broyhill Furniture Industries, Inc., HDM Furniture Industries,
Inc., Lane Furniture Industries, Inc., and Thomasville Furniture
Industries, Inc, the Loan Parties named therein, the Lender
Parties thereto, and JPMorgan Chase Bank, N.A., as
Administrative Agent
|
|
|
|
8-K
|
|
August 10, 2007
|
|
10.1
|
|
10
|
.26
|
|
First Amendment, dated March 17, 2008, to Credit Agreement,
dated August 9, 2007, among the Company, Broyhill Furniture
Industries, Inc., HDM Furniture Industries, Inc., Lane Furniture
Industries, Inc., and Thomasville Furniture Industries, Inc, the
Loan Parties named therein, the Lender Parties thereto, and
JPMorgan Chase Bank, N.A., as Administrative Agent
|
|
|
|
10-Q
|
|
May 12, 2008
|
|
10.2
|
|
10
|
.27
|
|
Amendment No. 2 to Credit Agreement and Waiver, dated February
20, 2009, among the Company, Broyhill Furniture Industries,
Inc., HDM Furniture Industries, Inc., Lane Furniture Industries,
Inc., and Thomasville Furniture Industries, Inc, the Loan
Parties named therein, the Lender Parties thereto, and JPMorgan
Chase Bank, N.A., as Administrative Agent
|
|
|
|
10-K
|
|
March 2, 2009
|
|
10.27
|
|
21
|
.1
|
|
List of Subsidiaries of the Company
|
|
X
|
|
|
|
|
|
|
|
23
|
.1
|
|
Consent of Independent Registered Public Accounting Firm
|
|
X
|
|
|
|
|
|
|
|
31
|
.1
|
|
Certification of Ralph P. Scozzafava, Chairman of the Board and
Chief Executive Officer of the Company, Pursuant to Rule
13a-14(a)/15d-14(a)
|
|
X
|
|
|
|
|
|
|
|
31
|
.2
|
|
Certification of Steven G. Rolls, Chief Financial Officer
(Principal Financial Officer) of the Company, Pursuant to Rule
13a-14(a)/15d-14(a)
|
|
X
|
|
|
|
|
|
|
|
32
|
.1
|
|
Certification of Ralph P. Scozzafava, Chairman of the Board and
Chief Executive Officer of the Company, Pursuant to 18 U.S.C.
Section 1350
|
|
X
|
|
|
|
|
|
|
|
32
|
.2
|
|
Certification of Steven G. Rolls, Chief Financial Officer
(Principal Financial Officer) of the Company, Pursuant to 18
|
|
X
|
|
|
|
|
|
|
|
|
|
|
U.S.C. Section 1350
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Indicates management contact or compensatory plan, contract or
arrangement. |
70