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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2000 or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from_________________ to
__________________
Commission file number I-91
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Furniture Brands International, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 43-0337683
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 South Hanley Road, St. Louis, Missouri 63105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 314/863-1100
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange on
Title of each class which registered
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Common Stock - $1.00 Stated Value New York Stock Exchange
with Preferred Stock Purchase Rights
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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(Title of Class)
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, and (2) has been subject to
such filing requirements for the past 90 days. Yes x 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 registrant's 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 [ ]
The aggregate market value of the voting stock held by
non-affiliates of the registrant as of February 28, 2001, was approximately
$1,226,537,174.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date.
50,207,425 shares as of February 28, 2001
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Definitive Proxy Statement for Annual Meeting
of Stockholders on April 26, 2001 ................... Part III
PART I
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Item 1. Business
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(a) General Development of Business
On January 10, 2000, Thomasville Furniture Industries, Inc. announced a license
agreement with Harrods Department Store, under which Highland House, a division
of Thomasville, will design and manufacture the Harrods Of Knightsbridge Fine
Furniture Collection.
(c) Narrative Description of Business
The Company, one of the largest manufacturers of residential furniture in the
United States, markets its products through its three operating subsidiaries:
Broyhill Furniture Industries, Inc.; Lane Furniture Industries, Inc.; and
Thomasville Furniture Industries, Inc.
PRODUCTS
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The Company manufactures and distributes (i) case goods, consisting of bedroom,
dining room and living room furniture, (ii) stationary upholstery products,
consisting of sofas, loveseats, sectionals and chairs, (iii) occasional
furniture, consisting of wood tables, accent pieces, home entertainment centers
and home office furniture, and (iv) recliners, motion furniture and sleep sofas.
The Company's brand name positioning by price and product category is shown
below.
UPHOLSTERY
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RECLINER/
PRICING CATEGORY CASE GOODS OCCASIONAL STATIONARY MOTION
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PREMIUM Thomasville Thomasville Thomasville
BEST Thomasville Thomasville Thomasville Thomasville
Lane Lane Lane Lane
Broyhill Broyhill Broyhill Broyhill
BETTER Lane Lane Lane Lane
Broyhill Broyhill Broyhill Broyhill
GOOD Broyhill Broyhill Broyhill Broyhill
Lane Lane
PROMOTIONAL Founders
RTA Creative Interiors
BROYHILL FURNITURE INDUSTRIES
Broyhill produces collections of medium-priced bedroom, dining room and living
area furniture aimed at middle-income consumers. Broyhill's wood furniture
offerings consist of bedroom, dining room and living room furniture, occasional
tables, accent items, free-standing home entertainment centers and home office
furniture. Upholstered products include sofas, sleep sofas, loveseats,
sectionals, chairs, and fully reclining furniture all offered in a variety of
fabrics and leathers. Broyhill's residential furniture divisions produce a wide
range of furnishings in country, traditional, European, contemporary and
lifestyle designs.
The widely recognized Broyhill trademarks include Broyhill and Broyhill
Signature Series. The flagship Broyhill product line concentrates on bedroom,
dining room, upholstered and occasional furniture designed for the "good" and
"better" price categories. The Broyhill Signature Series product line enjoys an
excellent reputation for highly styled case goods collections in the "best"
price category.
LANE FURNITURE INDUSTRIES
Lane manufactures and markets a broad range of high quality furniture targeting
the "good", "better" and "best" price categories. Lane targets niche markets
with its three operating divisions, which participate in such segments of the
residential furniture market as motion furniture, wicker and rattan, and cedar
chests.
Action Industries manufactures and markets reclining chairs and motion furniture
in the "good," "better" and "best" price categories under the Lane brand name.
Motion furniture consists of sofas and loveseats with recliner-style moving
parts and comfort features, wall saver recliners, pad-over chaise recliners,
hi-leg recliners, sleep sofas and motion sectionals. Royal Development Company
designs and manufactures the mechanisms used in Action Industries' reclining
furniture products.
In March of 1999, Action introduced the Lane Leather collection. Lane Leather
represents an important source of growth as leather is the fastest-growing
category in upholstered furniture. The collection, priced in the "best" category
comes in three styles - American Ranch, American Traditional and Urban
Contemporary.
Lane Division manufactures and sells cedar chests, living room, bedroom and
dining room furniture, wall systems, desks, console tables and mirrors and other
occasional wood pieces. Lane Division furniture is sold in the "better" and
"best" price categories.
Laneventure manufactures and markets moderately priced wicker, rattan and bamboo
furniture, tables, occasional wood pieces and two lines of upholstered
furniture. One line is comprised of contemporary and modern upholstered
furniture and metal and glass occasional and dining tables, and the other which
is comprised of traditional and contemporary upholstered furniture, primarily
sofas, loveseats, chairs and ottomans. Laneventure also manufactures outdoor and
patio furniture featuring fast drying upholstered cushions under the names
WeatherMaster and Weathercraft, which have developed significant consumer
acceptance. In 1999 Laneventure entered two new markets - exposed aluminum and
teak.
THOMASVILLE FURNITURE INDUSTRIES
Thomasville manufactures and markets wood furniture, upholstered products and
promotional/RTA furniture. Thomasville markets its products primarily under the
Thomasville brand name. Thomasville offers an assortment of upholstery and wood
under one brand name that targets the "best" and "premium" price categories.
Upholstery is primarily marketed in three major styles: traditional, American
traditional/country and casual/lifestyle contemporary. Upholstery style is
determined by both frame style and fabric or leather selection. Thomasville's
frame assortment allows the consumer to select from a wide variety of different
styles within the general style categories, and as much as 45% of the
Thomasville fabric and leather offering changes in a 12 month period, insuring
that the latest colors and textures are available. Wood furniture is primarily
marketed in four major styles: American traditional/ country, 18th century,
European traditional and casual contemporary.
Hickory Chair manufactures and markets traditional styles of upholstered
furniture, dining room collections and occasional tables in the "best" and
"premium" price categories. The Hickory Chair division has been crafting fine
reproductions of 18th century furniture for over 80 years. For example, Hickory
Chair offers the James River collection which features reproductions of fine
furnishings from Virginia plantations, and the Mount Vernon collection, which
features reproductions from George Washington's home. In October of 1999,
Hickory Chair introduced its Thomas O'Brien collection, which includes
upholstery, chairs, tables, beds and cabinetry in O'Brien's acclaimed "warm
modernist" style. Hickory Chair also introduced Grand Vista, a collection of
larger scale, casual reproductions from the Museum of Santa Fe and William
Poole, a collection of case goods and upholstery.
Pearson has been manufacturing and selling contemporary and traditional styles
of finely tailored upholstered furniture including sofas, loveseats, chairs and
ottomans for over 50 years. Pearson furniture sells in the "premium" price
category and is distributed to high-end furniture stores and interior designers.
HBF manufactures and sells a line of office furniture, including chairs, tables,
conference tables, desks and credenzas, in the upper-medium price range.
Highland House manufactures upholstered products in the "better" and "best"
price categories. During 1999, Highland House introduced the Rue de Provence
collection of Provencal French bedroom pieces, occasional furniture and
upholstery pieces that use unique fabric selections supplied exclusively to
Highland House from southern France.
Founders offers assembled bedroom sets, bookcases and home entertainment centers
under the Founders brand name to a variety of retailers for sale to consumer
end-users and certain contract customers. Creative Interiors markets RTA
(ready-to-assemble) furniture such as home entertainment centers, bookcases,
bedroom and kitchen/utility furniture and computer desks under the Creative
Interiors brand name.
DISTRIBUTION
The Company's strategy of targeting diverse distribution channels such as
furniture centers, independent dealers, national and local chain stores,
department stores, specialty stores and decorator showrooms is supported by
dedicated sales forces covering each of these distribution channels. The Company
continues to explore opportunities to expand international sales and to
distribute through non-traditional channels such as wholesale clubs and catalog
retailers.
The Company's breadth of product and national scope of distribution enable it to
effectively service national retailers such as J.C. Penney and HomeLife and key
regional retailers such as Havertys, Breuner's and Kittle's. The consolidation
of the retail residential furniture industry has made access to distribution
channels an important competitive advantage for manufacturers. The Company has
developed dedicated distribution channels by expanding its gallery program and
the network of independent dealer-owned dedicated retail locations, such as
Thomasville Home Furnishings Stores. The Company distributes its products
through a diverse network of independently-owned retail locations, which
includes 137 free-standing stores, 1,522 galleries and 572 furniture centers.
Haverty Furniture Companies, Inc. and the Company have formed a strategic
alliance whereby Havertys will allocate up to one-half of the retail floor space
in all of its stores to the prominent display of product manufactured by the
Company. This alliance advances the Company's strategy of expanding distribution
and dedicated display space.
In February of 1999, the Company and Benchmark Home Furnishings, Inc. announced
a cooperative effort to develop a 160,000 square foot Benchmark store in Kansas
City dedicated exclusively to products manufactured by the Company.
In February of 1999, the Company and Kittle's Home Furnishings, Inc. announced a
strategic alliance whereby Kittle's has agreed to expand its commitment to
products manufactured by the Company.
Broyhill, Lane and Thomasville have all developed gallery programs with
dedicated dealers displaying furniture in complete room ensembles. These
retailers employ a consistent showcase gallery concept wherein 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. The Company offers substantial services to retailers to support
their marketing efforts, including coordinated national advertising,
merchandising and display programs and extensive dealer training.
Thomasville Home Furnishings Stores are dealer-owned, free-standing retail
locations that exclusively feature Thomasville furniture. The Company believes
distributing its products through dedicated, free-standing stores strengthens
brand awareness, provides well-informed and focused sales personnel and
encourages the purchase of multiple items per visit.
Showrooms for the national furniture market are located in Thomasville and High
Point, North Carolina and for regional markets in Atlanta, Georgia; Chicago,
Illinois; Tupelo, Mississippi; and San Francisco, California.
BROYHILL FURNITURE INDUSTRIES
One of Broyhill's principal distribution channels is the Broyhill Showcase
Gallery program. This program, started in 1983, involves 335 domestic and
international participating dealer locations. Each dealer in the Broyhill
Showcase Gallery program owns the gallery and the Broyhill furniture inventory.
The program incorporates a core merchandise program, advertising material
support, in-store merchandising events and educational opportunities for the
retail store sales and management personnel. The average Broyhill Showcase
Gallery consists of 7,500 square feet of dedicated display space. Furniture is
displayed in complete and fully accessorized room settings instead of as
individual pieces.
For the retailer that is currently not a participant in the gallery program,
Broyhill offers the Independent Dealer Program. This concept, initiated in 1987,
is designed to strengthen Broyhill's relationship with these retailers by
assisting them in overcoming some of the significant difficulties in running an
independent furniture business. Participating retailers in the Independent
Dealer Program commit to a minimum, pre-selected lineup of Broyhill merchandise
and, in return, receive a detailed, step-by-step, year-round advertising and
merchandising plan. The program includes three major sales events per year,
monthly promotional themes and professionally prepared advertising and
promotional materials at nominal cost in order to help increase consumer
recognition on the local level. As part of the Independent Dealer Program,
Broyhill offers the Broyhill Furniture Center Program to 572 retailers that have
committed at least 2,000 square feet exclusively to Broyhill products arranged
in gallery-type room settings. This program includes all of the benefits of the
Independent Dealer Program, plus additional marketing, design and advertising
assistance. The Company seeks to develop these relationships so that some of
these retailers may eventually become participants in the Broyhill Showcase
Gallery program.
LANE FURNITURE INDUSTRIES
Lane distributes its products nationally and internationally through a well
established network of approximately 16,000 retail locations. A diverse
distribution network is utilized in keeping with Lane's strategy of supplying
customers with highly specialized products in selected niche markets. This
distribution network primarily consists of independent furniture stores,
regional chains such as Havertys and Art Van, and department store companies
such as J.C. Penney, HomeLife, May Department Stores, Federated Department
Stores and Dillard Department Stores.
Lane has established specialty gallery programs with 1,001 participating
dealers. This includes 282 dealer-owned Comfort Showcase Galleries established
by Action Industries. The Comfort Showcase Galleries average approximately 4,200
square feet of retail space specifically dedicated to the display, promotion and
sale of Action Industries' products. Lane's other gallery programs consist of
Laneventure Raymond Waites Galleries and 608 Cedar Chest Boutiques.
THOMASVILLE FURNITURE INDUSTRIES
Thomasville products are offered at 674 independently-owned retail locations,
including 226 Thomasville Galleries, 137 Thomasville Home Furnishings Stores and
311 authorized dealers. The Thomasville Gallery concept was initiated in 1983.
Thomasville Galleries have an average 7,500 square feet of retail space
specifically dedicated to the display, promotion and sale of Thomasville
products. The first Thomasville Home Furnishings Store opened in 1988. The
typical Thomasville Home Furnishings Store is a 15,000 square foot
independently-owned store offering a broad range of Thomasville products,
presented in a home-like setting by specially trained salespersons.
Pearson distributes its products primarily through premium-quality dealers and
the interior design trade. Hickory Chair also distributes through
premium-quality dealers including 20 gallery locations.
Thomasville's Founders division sells promotional furniture to a variety of
retailers for sale to consumer end-users and certain contract customers.
Promotional furniture is sold to retail chains such as Value City, as well as
independent furniture stores. Promotional furniture is also sold in the
hospitality and health care markets of Thomasville's contract business.
Thomasville's Creative Interiors division sells RTA furniture to customers which
include national chains such as Wal-Mart and Target, catalog showrooms, discount
mass merchandisers, warehouse clubs and home furnishings retailers.
MARKETING AND ADVERTISING
Advertising is used to increase consumer awareness of the Company's brand names
and is targeted to specific consumer segments through national and regional
television as well as leading shelter and other popular magazines such as Better
Homes and Gardens, People and Good Housekeeping. Each operating company uses
focused advertising in major markets to create buying urgency around specific
sale events and to provide dealer location information, enabling retailers to be
listed jointly in advertisements for maximum advertising efficiency and shared
costs. The Company seeks to increase consumer buying and strengthen
relationships with retailers through cooperative advertising and selective
promotional programs. The Company focuses its marketing efforts on prime
potential consumers utilizing information from databases and from callers to
each operating company's toll-free telephone number.
BROYHILL FURNITURE INDUSTRIES
Broyhill's advertising programs focus on translating its strong consumer
awareness into increased sales. Broyhill's current marketing strategy features
national television advertising, in addition to its national print advertising
program and traditional promotional programs such as furniture "giveaways" on
television game shows and dealer-based promotions such as product mailings and
brochures. The national print advertising program, which consists of multi-page
layouts, is designed to appeal to the consumer's desire for decorating
assistance and increased confidence in making the decision to purchase a big
ticket product such as furniture. These advertisements are run in publications
such as Good Housekeeping and Better Homes and Gardens which appeal to
Broyhill's consumer base. Game show promotions, a long-standing Broyhill
tradition, include popular programs such as Wheel of Fortune and The Price is
Right. An extensive public relations campaign also exposes Broyhill products in
leading magazine and newspaper editorial features.
LANE FURNITURE INDUSTRIES
Lane's marketing approach reflects the diversity of its various divisions.
Action Industries employs an integrated marketing/advertising strategy in which
it coordinates magazine, newspaper, circular and television advertising with
other marketing programs to promote a single product. The other Lane divisions
began using television advertising in 1998. These commercials featured the Eddie
Bauer Lifestyles by Lane collection, produced by the Lane Division and
Laneventure. Each of the Lane divisions advertises extensively in trade and
consumer publications targeting various niche markets.
THOMASVILLE FURNITURE INDUSTRIES
Thomasville's current advertising appears in national network and cable
television commercials during peak promotional periods. The campaign emphasizes
Thomasville fashion and quality leadership through the use of dramatic
commercials featuring individual, high quality wood and upholstery pieces.
National cable networks include A&E, The Discovery Channel, CNN, CNN Headline
News, The Weather Channel, TNN, Nickelodeon, The Travel Channel, TBS and
Entertainment Network.
To help retailers sell its products through to consumers, Thomasville offers a
full twelve month schedule of promotional support which includes promotional
concepts, selected product discounts, cooperative advertising funds, and a
complete advertising package with color newspaper layouts plus radio and
television commercials dealers can use as supplied. Thomasville runs national
sale events to coincide with major industry sale periods. These events include
national print ads or Thomasville-designed newspaper inserts for dealer use.
MANUFACTURING
Broyhill operates 18 finished case goods and upholstery production and warehouse
facilities totalling over 5.3 million square feet. All finished goods plants are
located in North Carolina. Broyhill pioneered the use of mass production
techniques in the furniture industry and by utilizing longer production runs
achieves economies of scale.
Lane operates 11 finished case goods and upholstery production and warehouse
facilities in Mississippi, North Carolina and Virginia totalling over 4.9
million square feet. Since the late 1980s, significant capital expenditures have
been made to acquire technologically advanced manufacturing equipment which has
increased factory productivity as well as capacity.
Thomasville manufactures or assembles its products at 21 finished case goods and
upholstery production and warehouse facilities located in North Carolina,
Virginia, and Tennessee totalling over 7.1 million square feet. Each plant is
specialized, manufacturing premium furniture products, allowing more efficient
production runs while maintaining high quality standards.
The manufacturing process for Thomasville's Creative Interiors division is
highly automated. Large fiberboard and particleboard sheets are machine-finished
in long production runs, then stored and held for assembly using highly
automated assembly lines. Completed goods are flat packed and stored in an
automated warehouse to provide quicker delivery to customers. Ninety percent of
Creative Interiors products are shipped within 14 days of production.
RAW MATERIALS AND SUPPLIERS
The raw materials used by the Company in manufacturing its products include
lumber, veneers, plywood, fiberboard, particleboard, paper, hardware, adhesives,
finishing materials, glass, mirrored glass, fabrics, leathers and upholstered
filling material (such as synthetic fibers, foam padding and polyurethane
cushioning). The various types of wood used in the Company's products include
cherry, oak, maple, pine and pecan, which are purchased domestically, and
mahogany, which is purchased abroad. Fabrics, leathers and other raw materials
are purchased both domestically and abroad. Management believes that its supply
sources for those materials are adequate.
On February 26, 1999, the Company and Outlook International, Ltd. announced an
agreement in which Outlook will act as exclusive representative for the Company
for the manufacture of products in the Far East.
Other than Outlook International, the Company has no long-term supply contracts
and the Company has experienced no significant problems in supplying its
operations. Although the Company has strategically selected suppliers of raw
materials, the Company believes that there are a number of other sources
available, contributing to its ability to obtain competitive pricing for raw
materials. Raw materials prices fluctuate over time depending upon factors such
as supply, demand and weather. Increases in prices may have a short-term impact
on the Company's margins for its products.
The majority of supplies for promotional and RTA products are purchased
domestically, although paper and certain hardware is purchased abroad.
Management believes, however, that its proximity to and relationships with
suppliers are advantageous for the sourcing of such materials. In addition, by
combining the purchase of various raw materials (such as foam, cartons, springs
and fabric) and services, Broyhill, Lane, and Thomasville have been able to
realize cost savings.
ENVIRONMENTAL MATTERS
The Company is subject to a wide-range of federal, state and local 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
("Superfund"). Certain of the Company's operations use glues and coating
materials that contain chemicals that are considered hazardous under various
environmental laws. Accordingly, management closely monitors the Company's
environmental performance at all of its facilities. Management believes the
Company is in substantial compliance with all environmental laws. While the
Company may be required to make capital investments at some of its facilities to
ensure compliance, the Company believes it will continue to meet all applicable
requirements in a timely fashion and that the amount of money required to meet
these requirements will not materially affect its financial condition or its
results of operations.
The Company has been identified as a potentially responsible party ("PRP") at a
number of superfund sites. The Company believes that its liability with respect
to most of the sites is de minimis, and the Company is entitled to
indemnification by others with respect to liability at certain sites. Management
believes that any liability as a PRP with regard to the superfund sites will not
have a material adverse effect on the financial condition or results of
operations of the Company.
COMPETITION
The furniture manufacturing industry is highly competitive. The Company's
products compete with products made by a number of furniture manufacturers,
including La-Z-Boy Incorporated, Lifestyle Furnishings International Ltd.,
Bassett Furniture Industries, Inc., and Ethan Allen Interiors, Inc. as well as
approximately 600 smaller producers. The elements of competition include
pricing, styling, quality and marketing.
EMPLOYEES
As of December 31, 2000, the Company employed approximately 20,700 people. None
of the Company's employees is represented by a union.
BACKLOG
The combined backlog of the Company's operating companies as of December 31,
2000 aggregated approximately $178 million, compared to approximately $206
million as of December 31, 1999.
Item 2. Properties
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The Company owns or leases the following principal plants, offices and
warehouses:
Floor Owned
Type of Space or
Division Location Facility (Sq. Ft.) Leased
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Furniture
Brands St. Louis, MO Headquarters 26,800 Leased
Broyhill Lenoir, NC Headquarters 136,000 Owned
Broyhill Lenoir, NC Plant/Warehouse 312,632 Owned
Broyhill Newton, NC Plant/Warehouse 382,626 Owned
Broyhill Lenoir, NC Plant/Warehouse 628,000 Owned
Broyhill Rutherfordton, NC Plant/Warehouse 575,656 Owned
Broyhill Lenoir, NC Plant/Warehouse 419,000 Owned
Broyhill Lenoir, NC Plant/Warehouse 390,020 Owned/
Leased
Broyhill Rutherfordton, NC Plant/Warehouse 433,597 Owned
Broyhill Conover, NC Plant/Warehouse 316,542 Owned
Broyhill Lenoir, NC Plant/Warehouse 516,439 Owned
Broyhill Lenoir, NC Plant/Warehouse 256,318 Owned
Broyhill Lenoir, NC Plant 56,250 Owned
Broyhill Lenoir, NC Plant/Warehouse 252,380 Owned
Broyhill Taylorsville, NC Plant/Warehouse 212,754 Owned
Broyhill Lenoir, NC Plant 124,700 Owned
Broyhill Marion, NC Plant 22,712 Owned
Broyhill Lenoir, NC Warehouse 96,000 Owned
Broyhill Lenoir, NC Warehouse 252,250 Leased
Broyhill Lenoir, NC Warehouse 124,200 Leased
Lane Altavista, VA Plant/Warehouse 1,091,600 Owned
Lane Altavista, VA Headquarters 62,000 Owned
Lane Conover, NC Plant/Warehouse 348,180 Owned
Lane Conover, NC Plant 345,130 Owned
Lane Rocky Mount, VA Plant/Warehouse 598,962 Owned
Lane Rocky Mount, VA Plant 50,300 Owned
Floor Owned
Type of Space or
Division Location Facility (Sq. Ft.) Leased
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Lane High Point, NC Plant 187,162 Owned
Lane Pontotoc, MS Plant/Warehouse 358,652 Owned
Lane Verona, MS Plant/Warehouse 410,000 Owned
Lane Saltillo, MS Plant/Warehouse 570,328 Owned
Lane Tupelo, MS Plant/Warehouse 712,675 Owned
Lane Tupelo, MS Warehouse 249,000 Owned
Thomasville Thomasville, NC Headquarters/ 256,000 Owned
Showroom
Thomasville Thomasville, NC Plant/Warehouse 373,000 Owned
Thomasville Thomasville, NC Plant 240,000 Owned
Thomasville Thomasville, NC Plant 325,000 Owned
Thomasville Thomasville, NC Plant 309,850 Owned
Thomasville Lenoir, NC Plant/Warehouse 828,000 Owned
Thomasville Winston-Salem, NC Plant/Warehouse 706,000 Owned
Thomasville West Jefferson, NC Plant/Warehouse 223,545 Owned
Thomasville Johnson City, TN Plant/Warehouse 284,120 Owned
Thomasville Statesville, NC Plant 158,600 Owned
Thomasville Troutman, NC Plant 238,200 Owned
Thomasville Conover, NC Plant 123,200 Owned
Thomasville Hickory, NC Plant 58,700 Owned
Thomasville Hickory, NC Plant 98,700 Owned
Thomasville Thomasville, NC Warehouse 731,000 Owned
Thomasville Appomattox, VA Plant/Warehouse 829,800 Owned
Thomasville Carysbrook, VA Plant 189,000 Owned
Thomasville Hickory, NC Plant/Warehouse 209,800 Leased
Thomasville Conover, NC Plant/Warehouse 260,000 Owned
Thomasville Hickory, NC Plant/Warehouse 555,511 Owned
Thomasville Hickory, NC Plant/Warehouse 211,391 Owned
Thomasville High Point, NC Plant/Warehouse 178,500 Owned
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The Tupelo, Mississippi facility is encumbered by a mortgage and first lien
securing industrial revenue bonds.
The Company believes its properties are generally well maintained, suitable for
its present operations and adequate for current production requirements.
Productive capacity and extent of utilization of the Company's facilities are
difficult to quantify with certainty because in any one facility maximum
capacity and utilization varies periodically depending upon the product that is
being manufactured, the degree of automation and the utilization of the labor
force in the facility. In this context, the Company estimates that overall its
production facilities were effectively utilized during 2000 at moderate to high
levels of productive capacity and believes that in conjunction with its import
capabilities the Company's facilities have the capacity, if necessary, to expand
production to meet anticipated product requirements.
Item 3. Legal Proceedings
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The Company is or may become a defendant in a number of pending or threatened
legal proceedings in the ordinary course of business. In the opinion of
management, the ultimate liability, if any, of the Company from all such
proceedings will not have a material adverse effect upon the consolidated
financial position or results of operations of the Company and its subsidiaries.
The Company is also subject to regulation regarding environmental matters, and
is a party to certain actions related thereto. For information regarding
environmental matters, see "Item 1. Business -- Environmental Matters."
Item 4. Submission of Matters to a Vote of Security Holders
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Not applicable.
PART II
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Item 5. Market for The Registrant's Common Equity and Related Stockholder
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Matters
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As of February 28, 2001, there were approximately 2,100 holders of record of
Common Stock.
Shares of the Company's Common Stock are traded on the New York Stock Exchange.
The reported high and low sale prices for the Company's Common Stock on the New
York Stock Exchange is included in Note 11 to the consolidated financial
statements of the Company.
The Company has not paid cash dividends on its Common Stock during the two years
ended December 31, 1999 and 2000.
Item 6. Selected Financial Data
FIVE-YEAR CONSOLIDATED FINANCIAL REVIEW
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(Dollars in thousands Year Ended December 31,
except per share data) ----------------------------------------------------------------
2000 1999 1998 1997 1996
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Summary of operations:
Net sales $ 2,116,239 $2,088,112 $1,960,250 $1,808,276 $1,696,795
Gross profit 546,859 550,312 515,512 450,690 431,473
Interest expense 36,389 37,577 43,455 42,747 45,217
Earnings before income tax
expense and extraordinary 165,997 176,764 152,143 107,254 88,292
Income tax expense 57,574 64,854 54,205 40,201 34,070
Earnings before extraordinary item 108,423 111,910 97,938 67,053 54,222
Extraordinary item (2,522) -- -- -- (7,417)
Net earnings $ 105,901b $ 111,910 $ 97,938a $ 67,053 $ 46,805
Per share of common stock - diluted:
Earnings before extraordinary item $ 2.15 $ 2.14 $ 1.82 $ 1.15 $ 0.88
Extraordinary item (0.05) -- -- -- (0.12)
Net earnings $ 2.10b $ 2.14 $ 1.82a $ 1.15 $ 0.76
Weighted average common shares
- diluted (in thousands) 50,443 52,335 53,809 58,473 61,946
Other information:
Working capital $ 548,463 $ 518,036 $ 509,148 $ 482,288 $ 462,661
Property, plant and equipment, net 303,235 297,746 293,777 294,061 301,962
Capital expenditures 53,310 48,951 44,358 40,004 40,344
Total assets 1,304,838 1,288,834 1,303,204 1,257,236 1,269,204
Long-term debt 462,000 535,100 589,200 667,800 572,600
Shareholders' equity $ 583,905 $ 474,197 $ 413,509 $ 323,322 $ 419,657
========================================================================================================
(a) Excluding nonrecurring gain, net of income tax expense, net earnings and
net earnings per common share were $90,077 and $1.67, respectively.
(b) Excluding extraordinary item, nonrecurring gain (cash dividend) and
additional bad debt expense, net of income tax effect, net earnings and net
earnings per common share were $108,351 and $2.15, respectively.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
As an aid to understanding the Company's results of operations
on a comparative basis, the following table has been prepared to set forth
certain statements of operations and other data for 2000, 1999, and 1998.
- -------------------------------------------------------------------------------------------------------------------------
(Dollars in millions) Year Ended December 31,
-----------------------------------------------------------------------------------
2000 1999 1998
-----------------------------------------------------------------------------------
% of % of % of
Net Net Net
Dollars Sales Dollars Sales Dollars Sales
- -------------------------------------------------------------------------------------------------------------------------
Net sales $2,116.2 100.0% $2,088.1 100.0% $1,960.2 100.0%
Cost of operations 1,529.9 72.3 1,498.6 71.8 1,406.4 71.7
Selling, general and
administrative
expenses 335.6 15.9 321.2 15.4 314.8 16.1
Depreciation and
amortization 58.1 2.7 56.5 2.7 55.5 2.8
- -------------------------------------------------------------------------------------------------------------------------
Earnings from
operations 192.6 9.1 211.8 10.1 183.5 9.4
Interest expense 36.4 1.7 37.6 1.8 43.5 2.2
Other income, net 9.8 0.4 2.6 0.1 12.1 0.6
- -------------------------------------------------------------------------------------------------------------------------
Earnings before income
tax expense and
extraordinary item 166.0 7.8 176.8 8.5 152.1 7.8
Income tax expense 57.6 2.7 64.9 3.1 54.2 2.8
- -------------------------------------------------------------------------------------------------------------------------
Net earnings before
extraordinary item $108.4 5.1% $111.9 5.4% $ 97.9 5.0%
=========================================================================================================================
Gross profit 1 $546.8 25.8% $550.3 26.4% $ 515.5 26.3%
=========================================================================================================================
1 The Company believes that gross profit provides useful information regarding
a company's financial performance. Gross profit has been calculated by
subtracting cost of operations and the portion of depreciation associated
with cost of goods sold from net sales.
(Dollars in millions) Year Ended December 31,
------------------------------------------------------------
2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------
Net sales $2,116.2 $2,088.1 $1,960.2
Cost of operations 1,529.9 1,498.6 1,406.4
Depreciation (associated with cost of goods sold) 39.5 39.2 38.3
---------------------------------------------------------------------------------------------------------------------------
Gross profit $546.8 $550.3 $515.5
===========================================================================================================================
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
Net sales for 2000 were $2,116.2 million compared to $2,088.1
million in 1999, an increase of $28.1 million or 1.3%. The increase in net sales
was achieved through the Company's continuing strategies of introducing new
products, emphasizing brand names and expanding distribution. These efforts were
mitigated in part by a general economic slowdown in the second half of the year
and the failure of several large customers.
Cost of operations for 2000 was $1,529.9 million compared to
$1,498.6 million for 1999, an increase of 2.1%. Cost of operations as a
percentage of net sales increased from 71.8% for 1999 to 72.3% for 2000
primarily due to manufacturing inefficiencies in the second half resulting from
temporary plant shutdowns to balance inventory with incoming orders.
Selling, general and administrative expenses increased to
$335.6 million in 2000 from $321.2 million in 1999, an increase of 4.5%. As a
percentage of net sales, selling, general and administrative expenses rose from
15.4% in 1999 to 15.9% in 2000 largely due to an increase in bad debt expense
associated with the customer failures noted earlier.
Depreciation and amortization for 2000 was $58.1 million
compared to $56.5 million in 1999, an increase of 2.9%. The amount of
depreciation and amortization attributed to "fresh-start" reporting was $13.5
million and $13.2 million in 2000 and 1999, respectively.
Interest expense for 2000 totaled $36.4 million compared with
$37.6 million in 1999. The decrease in interest expense reflects the Company's
debt reduction program, partially offset by higher interest rates.
Other income, net for 2000 totaled $9.8 million compared to
$2.6 million for 1999. For 2000, other income consisted of interest on
short-term investments of $0.6 million, a cash dividend (nonrecurring) of $7.6
million received by the Company relating to its minority investment in a company
which leases exhibition space to furniture and accessory manufacturers, and
other miscellaneous income and expense items totaling $1.6 million.
Income tax expense for 2000 totaled $57.6 million, producing
an effective tax rate of 34.7% compared with an effective tax rate of 36.7% for
1999. The effective tax rates for both periods were adversely impacted by
certain nondeductible expenses incurred and provisions for state and local
income taxes. The effective tax rate for 2000 was favorably impacted by the
nontaxable portion of the $7.6 million cash dividend.
Net earnings per common share before extraordinary item on a
diluted basis were $2.15 and $2.14 for 2000 and 1999, respectively. Weighted
average shares used in the calculation of net earnings per common share on a
basic and diluted basis were 49,532,000 and 50,443,000 in 2000, respectively,
and 50,968,000 and 52,335,000 in 1999, respectively.
Gross profit for 2000 was $546.8 million compared with $550.3
million for 1999, a decrease of 0.6%. The decrease in gross profit margin to
25.8% in 2000 from 26.4% in 1999 was primarily due to the manufacturing
inefficiencies resulting from the temporary plant shutdowns in the second half
noted earlier.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Net sales for 1999 were $2,088.1 million compared to $1,960.2
million for 1998, an increase of $127.9 million or 6.5%. The improved sales
performance for 1999 occurred at each operating company and ranged, in varying
degrees, across all product lines. The increase in net sales was achieved
through continued introductions of new products, emphasis on the Company's brand
names, and expansion of distribution.
Cost of operations for 1999 was $1,498.6 million compared to
$1,406.4 million for 1998, an increase of 6.6%. Cost of operations as a
percentage of net sales increased from 71.7% for 1998 to 71.8% in 1999 primarily
due to the disposal of low-margin and nonproductive inventories at less than
normal profit margins, and to a lesser degree, from short-term manufacturing
inefficiencies at several plants caused by an evolving change in case goods
product mix.
Selling, general and administrative expenses increased to
$321.2 million in 1999 from $314.8 million in 1998, an increase of 2.0%. As a
percentage of net sales, selling, general and administrative expenses decreased
from 16.1% for 1998 to 15.4% for 1999 because of continued tight control over
expenses.
Depreciation and amortization for 1999 was $56.5 million
compared to $55.5 million in 1998, an increase of 1.8%. The amount of
depreciation and amortization attributed to "fresh-start" reporting was $13.2
million and $13.7 million in 1999 and 1998, respectively.
Interest expense for 1999 totaled $37.6 million compared with
$43.5 million in 1998. The decrease in interest expense reflects the Company's
debt reduction program and reduced interest rates.
Other income, net for 1999 totaled $2.6 million compared to
$12.1 million for 1998, which included a nonrecurring cash dividend of $9.4
million. For 1999, other income consisted of interest on short-term investments
of $0.4 million and other miscellaneous income and expense items totaling $2.2
million.
Income tax expense for 1999 totaled $64.9 million, producing
an effective tax rate of 36.7% compared with an effective tax rate of 35.6% for
1998. The effective tax rates for both periods were adversely impacted by
certain nondeductible expenses incurred and provisions for state and local
income taxes. The effective tax rate for 1998 was favorably impacted by the
nontaxable portion of the $9.4 million cash dividend.
Net earnings per common share on a diluted basis were $2.14
and $1.82 for 1999 and 1998, respectively. Weighted average shares outstanding
used in the calculation of net earnings per common share on a basic and diluted
basis were 50,968,000 and 52,335,000 in 1999, respectively, and 52,095,000 and
53,809,000 in 1998, respectively.
Gross profit for 1999 was $550.3 million compared with $515.5
million in 1998, an increase of 6.8%. The increase in gross profit margin to
26.4% in 1999 from 26.3% in 1998 was due to improved manufacturing capacity
utilization, partially offset by an inventory reduction program and a change in
case goods product mix.
Financial Condition and Liquidity
Liquidity
Cash and cash equivalents at December 31, 2000 totaled $14.6
million compared to $7.4 million at December 31, 1999. For 2000, net cash
provided by operating activities totaled $132.1 million. Net cash used by
investing activities totaled $53.0 million. Net cash used in financing
activities totaled $71.9 million, including the net payment of $73.1 million of
long-term debt.
Working capital was $548.5 million at December 31, 2000
compared to $518.0 million at December 31, 1999. The current ratio was 4.8-to-1
at December 31, 2000 compared to 4.4-to-1 at December 31, 1999. While working
capital increased 5.9% from 1999 to 2000, the Company's focus remains on
efficient management of individual working capital components.
At December 31, 2000, long-term debt totaled $462.0 million
compared to $535.1 million at December 31, 1999. The decrease in indebtedness
was funded by cash flow from operations. The Company's debt-to-capitalization
ratio was 44.2% at December 31, 2000 compared to 53.0% at December 31, 1999.
Financing Arrangements
On June 7, 2000, the Company refinanced its secured credit
agreement with a group of financial institutions. The new credit facility is an
unsecured, five-year, revolving credit facility with a commitment of $630.0
million.
The new revolving credit facility allows for the issuance of
letters of credit and cash borrowings. Letter of credit outstandings are limited
to no more than $150.0 million, with cash borrowings limited only by the
facility's maximum availability less letters of credit outstanding. On December
31, 2000, there were $446.0 million in cash borrowings and $36.0 million in
letters of credit outstanding, leaving an excess of $148.0 million available
under the facility.
Cash borrowings under the new credit facility bear interest at
a base rate or at an adjusted Eurodollar rate plus an applicable margin which
varies, depending upon the type of loan the Company executes. The applicable
margin over the base rate and Eurodollar rate is subject to adjustment based
upon the credit ratings the facility receives from Standard & Poor's and
Moody's. At December 31, 2000, loans outstanding under the credit facility
consisted of $435.0 million based on the adjusted Eurodollar rate and $11.0
million based upon the base rate for a weighted average interest rate of 7.61%.
The Company believes that its revolving credit facility,
together with cash generated from operations, will be adequate to meet liquidity
requirements for the foreseeable future.
Other
Market Risk
The Company is exposed to market risk from changes in interest
rates. The Company's exposure to interest rate risk consists of its floating
rate revolving credit facility.
Recently Issued Statements of Financial Accounting Standard
In June, 1998 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 (SFAS No. 133) "Accounting
for Derivative Instruments and Hedging Activities." This statement standardizes
the accounting for derivative instruments by requiring that an entity recognize
the items as assets and liabilities in the statement of financial position and
measure them at fair value. SFAS No. 133, as amended, is effective for fiscal
years beginning after June 15, 2000. The Company does not believe the adoption
of this statement will have a material impact on its financial statements.
Forward-Looking Statements
The Company herein has made forward-looking statements within
the meaning of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements include statements
containing the words "expects," anticipates," "estimates," "believes," and words
of similar import. The Company cautions investors that any such forward-looking
statements are not guarantees of future performance and that certain factors may
cause actual results to differ materially from those in the forward-looking
statements. Such factors may include: overall business and economic conditions
and growth in the furniture industry; changes in customer spending patterns and
demand for home furnishings; competitive factors, such as design and marketing
efforts by other furniture manufacturers; pricing pressures; success of the
marketing efforts of retailers and the prospects for further customer failures;
the Company's success in furniture design and manufacture; the effects of
manufacturing realignments and cost savings programs; and other risk factors
listing from time to time in the Company's future public releases and SEC
reports.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in interest
rates. The Company's exposure to interest rate risk consists of its floating
rate Secured Credit agreement. Interest rate swaps are used to reduce the
Company's exposure to increases in interest rates.
ITEM 8. Financial Statements and Supplementary Data
- -----------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) December 31, December 31,
2000 1999
- --------------------------------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 14,606 $ 7,409
Receivables, less allowances of $23,075
($19,057 at December 31, 1999) 351,804 345,385
Inventories (Note 3) 294,454 285,395
Prepaid expenses and other current assets 30,717 33,711
- --------------------------------------------------------------------------------------------------------------------------------
Total current assets 691,581 671,900
Property, plant and equipment:
Land 19,206 18,930
Buildings and improvements 226,096 204,177
Machinery and equipment 345,040 322,527
- --------------------------------------------------------------------------------------------------------------------------------
590,342 545,634
Less accumulated depreciation 287,107 247,888
- --------------------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 303,235 297,746
Intangible assets (Note 4) 289,895 303,446
Other assets 20,127 15,742
- --------------------------------------------------------------------------------------------------------------------------------
$1,304,838 $1,288,834
================================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 65,483 $ 73,617
Accrued employee compensation 24,822 28,450
Accrued interest expense 7,646 1,762
Other accrued expenses 45,167 50,035
- --------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 143,118 153,864
Long-term debt (Note 5) 462,000 535,100
Other long-term liabilities 115,815 125,673
Shareholders' equity:
Preferred stock, authorized 10,000,000 shares,
no par value - issued, none
Common stock, authorized 100,000,000 shares,
$1.00 stated value - issued 52,277,066
shares at December 31, 2000 and 1999 (Note 6) 52,277 52,277
Paid-in capital 118,360 120,326
Retained earnings 462,473 356,572
Treasury stock at cost
(2,601,759 shares at December 31, 2000 and
2,907,059 shares at December 31, 1999) (49,205) (54,978)
- --------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 583,905 474,197
- --------------------------------------------------------------------------------------------------------------------------------
$1,304,838 $1,288,834
================================================================================================================================
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands except per share data)
Year Ended December 31,
-----------------------------------------
2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
Net sales $ 2,116,239 $ 2,088,112 $ 1,960,250
Costs and expenses:
Cost of operations 1,529,874 1,498,622 1,406,434
Selling, general and administrative expenses 335,596 321,205 314,837
Depreciation and amortization
(includes $13,546, $13,155 and $13,670
related to fair value adjustments) 58,155 56,528 55,469
- -------------------------------------------------------------------------------------------------------------------------
Earnings from operations 192,614 211,757 183,510
Interest expense 36,389 37,577 43,455
Other income, net 9,772 2,584 12,088
- -------------------------------------------------------------------------------------------------------------------------
Earnings before income tax expense and
Extraordinary item 165,997 176,764 152,143
Income tax expense (Note 7) 57,574 64,854 54,205
- -------------------------------------------------------------------------------------------------------------------------
Earnings before extraordinary item 108,423 111,910 97,938
Extraordinary item - early extinguishment
Of debt, net of income tax benefit (Note 9) (2,522) -- --
- -------------------------------------------------------------------------------------------------------------------------
Net earnings $ 105,901 $ 111,910 $ 97,938
=========================================================================================================================
Net earnings per common share - basic (Note 6):
Earnings before extraordinary item $ 2.19 $ 2.20 $ 1.88
Extraordinary item - early extinguishment of debt (0.05) -- --
- -------------------------------------------------------------------------------------------------------------------------
Net earnings per common share - basic $ 2.14 $ 2.20 $ 1.88
=========================================================================================================================
Net earnings per common share - diluted (Note 6):
Earnings before extraordinary item $ 2.15 $ 2.14 $ 1.82
Extraordinary item - early extinguishment of debt (0.05) -- --
- -------------------------------------------------------------------------------------------------------------------------
Net earnings per common share - diluted $ 2.10 $ 2.14 $ 1.82
=========================================================================================================================
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Year Ended December 31,
----------------------------------------
2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 105,901 $ 111,910 $ 97,938
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Net loss on early extinguishment of debt 2,522 -- --
Depreciation of property, plant and equipment 46,095 44,468 43,409
Amortization of intangible and other assets 12,060 12,060 12,060
Noncash interest and other expense 1,602 2,172 2,107
Increase in receivables (6,419) (21,221) (30,189)
(Increase) decrease in inventories (9,059) 21,987 (20,336)
Increase in prepaid expenses and
intangible and other assets (7,737) (2,872) (3,055)
Increase (decrease) in accounts payable, accrued
interest expense and other accrued expenses (9,226) (12,861) 29,704
Increase (decrease) in net deferred tax liabilities (2,788) (5,390) 2,624
Decrease in other long-term liabilities (807) (1,687) (2,956)
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 132,144 148,566 131,306
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from the disposal of assets 316 451 1,233
Additions to property, plant and equipment (53,310) (48,951) (44,358)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (52,994) (48,500) (43,125)
- ------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments for debt issuance costs (2,090) -- (1,684)
Additions to long-term debt 486,500 -- 218,000
Payments of long-term debt (559,600) (54,100) (295,800)
Proceeds from the issuance of common stock -- -- 3,192
Proceeds from the issuance of treasury stock 3,237 7,943 --
Purchase of treasury stock -- (59,720) (10,943)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (71,953) (105,877) (87,235)
- ------------------------------------------------------------------------------------------------------------------------
Net increase(decrease) in cash and cash equivalents 7,197 (5,811) 946
Cash and cash equivalents at beginning of period 7,409 13,220 12,274
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 14,606 $ 7,409 $ 13,220
========================================================================================================================
Supplemental Disclosure:
Cash payments for income taxes, net $ 63,120 $ 68,100 $ 49,889
========================================================================================================================
Cash payments for interest $ 30,873 $ 40,070 $ 42,974
========================================================================================================================
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) Common Paid-In Retained Treasury
Stock Capital Earnings Stock Total
- ---------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1997 $ 52,003 $ 124,595 $ 146,724 -- $ 323,322
Net earnings 97,938 97,938
Common stock activity:
Stock plans activity (Note 6) 274 2,918 3,192
Purchase of treasury stock
- 525,000 shares (10,943) (10,943)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1998 52,277 127,513 244,662 (10,943) 413,509
Net earnings 111,910 111,910
Common stock activity:
Stock plans activity (Note 6) (7,187) 15,685 8,498
Purchase of treasury stock
- 3,123,200 shares (59,720) (59,720)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1999 52,277 120,326 356,572 (54,978) 474,197
Net earnings 105,901 105,901
Common stock activity:
Stock plans activity (Note 6) (1,966) 5,773 3,807
- ---------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 2000 $ 52,277 $ 118,360 $ 462,473 $ (49,205) $ 583,905
=================================================================================================================================
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
1. The Company
Furniture Brands International, Inc. (referred to herein as the "Company")
is one of the largest home furniture manufacturers in the United States. During
the year ended December 31, 2000, the Company had three primary operating
subsidiaries: Broyhill Furniture Industries, Inc.; Lane Furniture Industries,
Inc.; and Thomasville Furniture Industries, Inc.
Substantially all of the Company's sales are made to unaffiliated furniture
retailers. The Company has a diversified customer base with no one customer
accounting for 10% or more of consolidated net sales and no particular
concentration of credit risk in one economic sector. Foreign operations and net
sales are not material.
2. Significant Accounting Policies
The significant accounting policies of the Company are set forth below.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results are likely to differ from
those estimates but management believes such differences are not significant.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and all of its subsidiaries. All material intercompany transactions are
eliminated in consolidation. The Company's fiscal year ends on December 31. The
operating companies included in the consolidated financial statements report
their results of operations as of the Saturday closest to December 31.
Accordingly, the results of operations will periodically include a 53-week
fiscal year. Fiscal years 2000, 1999, and 1998 were 52-week years.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity
of three months or less to be cash equivalents. Short-term investments are
recorded at amortized cost, which approximates market.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost when acquired.
Depreciation is calculated using both accelerated and straight-line methods
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.
Intangible Assets
The excess of cost over net assets acquired in connection with the
acquisition of Thomasville totaled $93,110. This intangible asset is being
amortized on a straight-line basis over a 40-year period.
The Company emerged from Chapter 11 reorganization effective with the
beginning of business on August 3, 1992. In accordance with generally accepted
accounting principles, the Company was required to adopt "fresh-start" reporting
which included adjusting all assets and liabilities to their fair values as of
the effective date. The ongoing impact of the adoption of fresh-start reporting
is reflected in the financial statements for all years presented.
As a result of adopting fresh-start reporting, the Company recorded
reorganization value in excess of amounts allocable to identifiable assets of
approximately $146,000. This intangible asset is being amortized on a
straight-line basis over a 20-year period.
Also in connection with the adoption of fresh-start reporting, the Company
recorded approximately $156,800 in fair value of trademarks and trade names
based upon an independent appraisal. Such trademarks and trade names are being
amortized on a straight-line basis over a 40-year period.
Long-lived assets are reviewed for impairment whenever events or changes in
business 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 values.
Fair Value of Financial Instruments
The Company considers 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.
Amounts outstanding under long-term debt agreements are considered to be
carried on the financial statements at their estimated fair values because they
were entered into recently and/or accrue interest at rates which generally
fluctuate with interest rate trends.
Revenue Recognition
The Company recognizes revenue when finished goods are shipped, with
appropriate provisions for returns and uncollectible accounts.
Income Taxes
Deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which those temporary differences are expected to be
recovered or settled. The effect of a change in tax rates on deferred tax assets
and liabilities is recognized in income in the period that includes the
enactment date.
Stock-Based Compensation
The Company accounts for stock-based compensation using the intrinsic value
method.
3. Inventories
Inventories are summarized as follows:
- --------------------------------------------------------------------------------------------------------------------------
December 31, December 31,
2000 1999
- --------------------------------------------------------------------------------------------------------------------------
Finished products $125,491 $112,389
Work-in-process 61,932 58,479
Raw materials 107,031 114,527
- --------------------------------------------------------------------------------------------------------------------------
$294,454 $285,395
===========================================================================================================================
4. Intangible Assets
Intangible assets include the following:
- --------------------------------------------------------------------------------------------------------------------------
December 31, December 31,
2000 1999
- --------------------------------------------------------------------------------------------------------------------------
Intangible assets, at cost:
Reorganization value in excess of amounts
Allocable to identifiable assets $146,063 $146,063
Trademarks and trade names 156,828 156,828
Excess of cost over net assets acquired 93,110 93,110
- --------------------------------------------------------------------------------------------------------------------------
396,001 396,001
Less accumulated amortization 106,106 92,555
- --------------------------------------------------------------------------------------------------------------------------
$289,895 $303,446
==========================================================================================================================
5. Long-Term Debt
Long-term debt consists of the following:
- --------------------------------------------------------------------------------------------------------------------------
December 31, December 31,
2000 1999
- --------------------------------------------------------------------------------------------------------------------------
Revolving credit facility (unsecured) $ 446,000 $ -
Secured credit agreement:
Revolving credit facility - 317,500
Term loan facility - 200,000
Other 16,000 17,600
- --------------------------------------------------------------------------------------------------------------------------
$ 462,000 $535,100
==========================================================================================================================
The following discussion summarizes certain provisions of the long-term
debt.
Revolving Credit Facility
On June 7, 2000, the Company refinanced its secured credit agreement with a
group of financial institutions. The new facility is an unsecured, five-year,
revolving credit facility with a commitment of $630,000. The revolving credit
facility allows for issuance of letters of credit and cash borrowings. Letter of
credit outstandings are limited to no more than $150,000, with cash borrowings
limited only by the facility's maximum availability less letters of credit
outstanding.
Currently, for letter of credit issuances, a fee of 0.75% per annum
(subject to increase/decrease based upon the Company achieving certain credit
ratings from Standard & Poor's and Moody's) is assessed for the account of the
lenders ratably. A further fee of 0.125% is assessed on standby letters of
credit representing a facing fee. A customary administrative charge for
processing letters of credit is also payable to the relevant issuing bank.
Letter of credit fees are payable quarterly in arrears.
Cash borrowings under the revolving credit facility bear interest at a base
rate or at an adjusted Eurodollar rate plus an applicable margin which varies,
depending upon the type of loan the Company executes. The applicable margin over
the base rate and adjusted Eurodollar rate is subject to adjustment based upon
achieving certain credit ratings. At December 31, 2000, loans outstanding under
the revolving credit facility consisted of $435,000 based on the adjusted
Eurodollar rate and $11,000 based on the base rate, for a weighted average
interest rate of 7.61%.
At December 31, 2000, there were $446,000 of cash borrowings and $35,994 in
letters of credit outstanding under the revolving credit facility, leaving an
excess of $148,006 available under the facility.
The revolving credit facility has no mandatory principal payments; however,
the commitment matures on June 7, 2005. The facility requires the Company to
meet certain financial covenants including a minimum Consolidated Net Worth and
Leverage Ratio. In addition, the facility requires repayment upon the occurrence
of a Change of Control of the Company.
Other
Other long-term debt consists of various industrial revenue bonds with
interest rates ranging from approximately 4.0% to 9.0%.
Interest Rate Swap Agreements
The Company had entered into an interest rate swap agreement to reduce the
impact of changes in interest rates on its floating rate long-term debt. In June
1999 and July 2000, the Company executed partial unwinds of $100,000 and
$200,000, respectively, of the $300,000 swap agreement. The gains from these
transactions are being amortized over the original life of the swap which would
have matured in January 2002.
Other Information
The Company has no mandatory long-term debt payments until 2005, at which
time $454,000 matures.
6. Common Stock
The Company's restated certificate of incorporation includes authorization
to issue up to 100.0 million shares of common stock with a $1.00 per share
stated value. As of December 31, 2000, 52,277,066 shares of common stock were
issued. It is not presently anticipated that dividends will be paid on common
stock in the foreseeable future.
The Company has been authorized by its Board of Directors to repurchase its
common stock from time to time in open market or privately negotiated
transactions. Common stock repurchases are recorded as treasury stock and may be
used for general corporate purposes. In 1999, the Company repurchased 3,123,200
shares for $59,720. As of December 31, 2000, the Company has Board of Directors'
authorization for the repurchase of an additional $100,000 of its common stock.
Shares of common stock were reserved for the following purposes at December
31, 2000:
Number of Shares
- -------------------------------------------------------------------------------
Common stock options:
Granted 4,345,634
Available for grant 1,707,115
- -------------------------------------------------------------------------------
6,052,749
===============================================================================
On April 29, 1999, stockholders approved the 1999 Long-Term Incentive Plan.
The plan provided for a total of 2,250,000 shares plus all remaining shares
available for grant or which become available for grant due to cancellation
under the 1992 Stock Option Plan. The plan is administered by the Executive
Compensation and Stock Option Committee of the Board of Directors and permits
certain key employees to be granted nonqualified options, performance-based
options, restricted stock, or combinations thereof. Options must be issued at
market value on the date of grant and expire in a maximum of ten years.
In 1999, the Company granted 79,000 shares of restricted stock. The
restricted shares vest over various periods from 2 to 5 years. The deferred
compensation expense is amortized to expense over the period of time the
restrictions are in place and the unamortized portion is classified as a
reduction of paid-in-capital in the Company's consolidated balance sheets.
Changes in options granted and outstanding are summarized as follows:
- ------------------------------------ ------------------------------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------------------------------
2000 1999 1998
---------------------------- --------------------------- ---------------------------
Average Average Average
Shares Price Shares Price Shares Price
--------------- ------------ --------------- ----------- ------------- -------------
Beginning of period 4,027,063 $12.67 4,018,581 $ 9.37 3,897,930 $ 7.48
Granted 734,600 16.70 772,600 23.49 436,500 23.02
Exercised (305,300) 6.83 (662,141) 6.02 (273,546) 4.81
Cancelled (110,729) 18.60 (101,977) 7.91 (42,303) 5.56
- ------------------------------------ --------------- ------------ --------------- ----------- ------------- -------------
End of period 4,345,634 $13.61 4,027,063 $12.67 4,018,581 $ 9.37
==================================== =============== ============ =============== =========== ============= =============
Exercisable at
end of period 2,591,726 2,342,822 2,261,639
==================================== =============== ============ =============== =========== ============= =============
Weighted average fair
value of options granted $ 9.52 $13.03 $11.04
==================================== =============== ============ =============== =========== ============= =============
Had compensation cost for the Company's stock-based compensation plan been
determined consistent with SFAS No. 123, the Company's net earnings and net
earnings per share would have been as follows:
- ---------------------------------------------------- ---------------------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------------------
2000 1999 1998
- ---------------------------------------------------- ----------------------- ---------------------- ----------------------
Net earnings
As reported $105,901 $111,910 $97,938
Pro forma 101,819 108,600 96,180
Net earnings per share - basic
As reported $ 2.14 $ 2.20 $ 1.88
Pro forma 2.06 2.13 1.85
Net earnings per share - diluted
As reported $ 2.10 $ 2.14 $ 1.82
Pro forma 2.05 2.10 1.80
==================================================== ======================= ====================== ======================
The weighted average fair value of options granted is estimated as of the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions: risk free interest rate of 5.70%, 5.00%, and 5.50%
in 2000, 1999, and 1998, respectively; expected dividend yield of 0% for all
years; expected life of 7 years for all years and expected volatility of 47%,
46%, and 35% for 2000, 1999, and 1998, respectively.
Summarized information regarding stock options outstanding and exercisable
at December 31, 2000 follows:
- ----------------------- --------------------- ------------------ ---------------- ------ --------------------------------
Outstanding Exercisable
--------------------- ------------------ ---------------- --------------------------------
Range of Average
Exercise Contractual Average Average
Prices Shares Life Price Shares Price
- ----------------------- --------------------- ------------------ ---------------- ------ ---------------- ---------------
Up to $10 1,640,134 2.3 $ 5.61 1,549,725 $ 5.51
$10 - $20 1,601,800 6.4 14.59 681,900 12.83
Over $20 1,103,700 6.7 24.09 360,101 24.14
- ----------------------- --------------------- ------------------ ---------------- ------ ---------------- ---------------
4,345,634 4.9 $13.61 2,591,726 $10.02
======================= ===================== ================== ================ ====== ================ ===============
Weighted average shares used in the computation of basic and diluted net
earnings per common share for 2000, 1999, and 1998 are as follows:
- --------------------------------------------------------------- ----------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------
2000 1999 1998
------------------- ------------------- ------------------
Weighted average shares used for
basic net earnings per common share 49,531,931 50,967,973 52,095,451
Effect of dilutive securities:
Stock options 910,805 1,366,611 1,713,515
- --------------------------------------------------------------- ------------------- ------------------- ------------------
Weighted average shares used for
diluted net earnings per common share 50,442,736 52,334,584 53,808,966
=============================================================== =================== =================== ==================
Excluded from the computation of diluted net earnings per common share were
options to purchase 1,163,700 and 1,100,300 shares at an average price of $23.81
and $24.21 per share during 2000 and 1999, respectively.
7. Income Taxes
Income tax expense was comprised of the following:
- ---------------------------------- --------------------------------------------------------------------------------------
Year Ended December 31,
---------------------------- ---------------------------- ----------------------------
2000 1999 1998
- ---------------------------------- ---------------------------- ---------------------------- ----------------------------
Current:
Federal $55,191 $62,108 $46,257
State and local 5,171 8,136 5,324
- ---------------------------------- ---------------------------- ---------------------------- ----------------------------
60,362 70,244 51,581
Deferred (2,788) (5,390) 2,624
- ---------------------------------- ---------------------------- ---------------------------- ----------------------------
$57,574 $64,854 $54,205
================================== ============================ ============================ ============================
The following table reconciles the differences between the federal
corporate statutory rate and the Company's effective income tax rate:
==================================================================== =====================================================
Year Ended December 31,
-----------------------------------------------------
2000 1999 1998
- -------------------------------------------------------------------- ----------------- ----------------- -----------------
Federal corporate statutory rate 35.0% 35.0% 35.0%
State and local income taxes, net of
federal tax benefit 1.7 2.5 1.8
Amortization of excess reorganization value 1.5 1.5 1.7
Dividend exclusion (1.1) - (1.2)
Other (2.4) (2.3) (1.7)
- -------------------------------------------------------------------- ----------------- ----------------- -----------------
Effective income tax rate 34.7% 36.7% 35.6%
==================================================================== ================= ================= =================
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,
2000 1999
- ------------------------------------------------------------------------ ------------------------ -----------------------
Deferred tax assets attributable to:
Expense accruals $ 15,293 $ 17,873
Valuation reserves 11,811 10,318
Employee postretirement benefits
other than pensions 2,855 2,927
Inventory costs capitalized 1,560 2,757
Employee pension plans 750 2,121
Other 2,805 2,632
- ------------------------------------------------------------------------ ------------------------ -----------------------
Total deferred tax assets 35,074 38,628
- ------------------------------------------------------------------------ ------------------------ -----------------------
Deferred tax liabilities attributable to:
Fair value adjustments (68,744) (71,422)
Depreciation (8,099) (8,428)
Fair market value adjustments -
accounts receivable (2,530) (5,060)
Other (9,679) (10,484)
- ------------------------------------------------------------------------ ------------------------ -----------------------
Total deferred tax liabilities (89,052) (95,394)
- ------------------------------------------------------------------------ ------------------------ -----------------------
Net deferred tax liabilities $(53,978) $(56,766)
======================================================================== ======================== =======================
The net deferred tax liabilities are included in the consolidated balance
sheets as follows:
- ------------------------------------------------------------------------ ------------------------ -----------------------
December 31, December 31,
2000 1999
- ------------------------------------------------------------------------ ------------------------ -----------------------
Prepaid expenses and other current assets $ 23,555 $ 25,605
Other long-term liabilities (77,533) (82,371)
- ------------------------------------------------------------------------ ------------------------ -----------------------
$(53,978) $(56,766)
======================================================================== ======================== =======================
8. Employee Benefits
The Company sponsors or contributes to retirement plans covering
substantially all employees. The total cost of all plans for 2000, 1999, and
1998 was $2,090, $5,649, and $7,773, respectively.
Company-Sponsored Defined Benefit Plans
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.
It is the Company's practice to fund pension costs to the extent that such
costs are tax deductible and in accordance with ERISA. The assets of the various
plans include corporate equities, government securities, corporate debt
securities and insurance contracts. The table below summarizes the funded status
of the Company-sponsored defined benefit plans.
- --------------------------------------------------------------------------------- --------------------- ----------------------
December 31, December 31,
2000 1999
- --------------------------------------------------------------------------------- --------------------- ----------------------
Change in projected benefit obligation:
Projected benefit obligation - beginning of year $313,756 $284,498
Service cost 8,665 8,379
Interest cost 22,522 21,905
Actuarial (gain) loss (3,298) 17,204
Benefits paid (18,134) (17,166)
Other - (1,064)
- --------------------------------------------------------------------------------- --------------------- ----------------------
Projected benefit obligation - end of year $323,511 $313,756
- --------------------------------------------------------------------------------- --------------------- ----------------------
Change in plan assets:
Fair value of plan assets - beginning of year $361,890 $332,541
Actual return on plan assets 9,402 44,731
Employer contributions 1,198 687
Benefits paid (18,134) (17,166)
Other - 1,097
- --------------------------------------------------------------------------------- --------------------- ----------------------
Fair value of plan assets - end of year $354,356 $361,890
- --------------------------------------------------------------------------------- --------------------- ----------------------
Funded status $ 30,845 $ 48,134
Unrecognized net gain (26,807) (49,006)
Unrecognized prior service cost 1,336 1,480
- --------------------------------------------------------------------------------- --------------------- ----------------------
Prepaid pension cost $ 5,374 $ 608
================================================================================= ===================== ======================
Net periodic pension cost for 2000, 1999, and 1998 included the following
components:
- ---------------------------------------------------------------------------- ----------------------------------------------
Year Ended December 31,
----------------------------------------------
2000 1999 1998
- ---------------------------------------------------------------------------- --------------- -------------- ---------------
Service cost-benefits earned during the period $ 8,665 $8,379 $7,419
Interest cost on the projected benefit obligation 22,522 21,905 19,856
Expected return on plan assets (31,840) (29,193) (25,464)
Net amortization and deferral (2,914) (1,230) (224)
- ---------------------------------------------------------------------------- --------------- -------------- ---------------
Net periodic pension (income) expense $(3,567) $ (139) $1,587
============================================================================ =============== ============== ===============
Employees are covered primarily by noncontributory plans, funded by Company
contributions to trust funds, which are held for the sole benefit of employees.
Monthly retirement benefits are based upon service and pay with employees
becoming vested upon completion of five years of service.
The expected long-term rate of return on plan assets was 9.0% in 2000, 9.0%
in 1999 and 8.5% in 1998. Measurement of the projected benefit obligation was
based upon a weighted average discount rate of 7.25% and a long-term rate of
compensation increase of 4.5% for all years presented.
Other Retirement Plans and Benefits
In addition to defined benefit plans, the Company makes contributions to
defined contribution plans and sponsors employee savings plans. The cost of
these plans is included in the total cost for all plans reflected above.
9. Extraordinary Item - Early Extinguishment of Debt
In conjunction with the June 7, 2000, refinancing of the Secured Credit
Agreement, the Company charged to results of operations $2,522, net of income
tax expense of $1,520, representing the deferred financing fees and expenses
pertaining to the refinanced facility. The charge was recorded as an
extraordinary item.
10. Commitments and Contingent Liabilities
Certain of the Company's real properties and equipment are operated under
lease agreements. Rental expense under operating leases totaled $18,514,
$17,417, and $16,537 for 2000, 1999, and 1998, respectively. Annual minimum
payments under operating leases are $15,639, $13,769, $11,949, $9,795, and
$5,817 for 2001 through 2005, respectively. Future minimum lease payments under
operating leases, reduced by minimum rentals from subleases of $1,802 at
December 31, 2000, aggregate $80,892.
The Company has provided guarantees related to store leases for certain
independent dealers opening Thomasville Home Furnishings Stores. The total
future lease payments guaranteed at December 31, 2000 were $49,469. The Company
believes the risk of significant loss from these lease guarantees is remote.
The Company is or may become a defendant in a number of pending or
threatened legal proceedings in the ordinary course of business. In the opinion
of management, the ultimate liability, if any, of the Company from all such
proceedings will not have a material adverse effect upon the consolidated
financial position or results of operations of the Company and its subsidiaries.
11. Quarterly Financial Information (Unaudited)
Following is a summary of unaudited quarterly information:
- ------------------------------------------------------ ---------------- --------------- ----------------- ----------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
- ------------------------------------------------------ ---------------- --------------- ----------------- ----------------
Year ended December 31, 2000:
Net sales $519,467 $499,746 $533,079 $563,947
Gross profit 130,066 126,812 141,547 148,434
Net earnings:
Earnings before extraordinary item 24,307 23,373 30,143 30,600
Extraordinary item - - (2,522) -
Total $ 24,307 $ 23,373 $ 27,621 $ 30,600
Net earnings per common share - basic:
Earnings before extraordinary item $ 0.49 $ 0.47 $ 0.61 $ 0.62
Extraordinary item - - (0.05) -
Total $ 0.49 $ 0.47 $ 0.56 $ 0.62
Net earnings per common share- diluted:
Earnings before extraordinary item $ 0.48 $ 0.46 $ 0.60 $ 0.61
Extraordinary item - - (0.05) -
Total $ 0.48 $ 0.46 $ 0.55 $ 0.61
Common stock price range:
High $ 21.69 $ 18.56 $ 21.69 $ 19.69
Low $ 14.94 $ 14.06 $ 14.25 $ 14.56
====================================================== ================ =============== ================= ================
Year ended December 31, 1999:
Net sales $521,169 $512,980 $520,061 $533,902
Gross profit 135,706 134,679 138,236 141,691
Net earnings $ 29,151 $ 27,460 $ 27,592 $ 27,707
Net earnings per common share:
Basic $ 0.59 $ 0.53 $ 0.54 $ 0.54
Diluted $ 0.58 $ 0.52 $ 0.52 $ 0.52
Common stock price range:
High $ 22.00 $27.50 $ 27.88 $ 27.88
Low $ 17.44 $17.06 $ 19.63 $ 20.94
====================================================== ================ =============== ================= ================
Net earnings in the fourth quarter 2000 includes two nonrecurring items that,
after taking into account the impact of income taxes, substantially offset each
other. The first was a $7,643 cash dividend from the Company's minority
investment in a company which leases exhibition space to furniture and accessory
manufacturers. This offset a $10,575 increase in bad debt expense attributable
to the recent failures of several large customers.
The Company has not paid cash dividends on its common stock during the three
years ended December 31, 2000. The closing market price of the Company's common
stock on December 31, 2000 was $21.06 per share.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
The sections entitled "Nominees" and "Section 16(a) Beneficial Ownership
Reporting Compliance" of the Company's Definitive Proxy Statement for the Annual
Meeting of Stockholders on April 26, 2001 are incorporated herein by reference.
Executive Officers of the Registrant
Current Appointed
Name Age Position Positions or Elected
---- --- -------- --------- ----------
*Wilbert G. Holliman 63 President of the Subsidiary -
Action Industries, Inc. 1989
Chief Executive Officer of
the Subsidiary - Action
Industries, Inc. 1994
Director X 1996
President X 1996
Chief Executive Officer X 1996
Chairman of the Board X 1998
John T. Foy 53 President and Chief Executive
Officer of the Subsidiary -
Action Industries, Inc. X 1996
Christian J. Pfaff 52 President and Chief Executive
Officer of the Subsidiary -
Thomasville Furniture Industries, Inc. X 1997
Dennis R. Burgette 53 President and Chief Executive
Officer of the Subsidiary -
Broyhill Furniture Industries, Inc. X 2000
Lynn Chipperfield 49 General Counsel 1993
Vice-President 1996
Secretary X 1996
Senior Vice President X 2000
Chief Administrative Officer X 2000
David P. Howard 50 Controller 1990
Vice-President X 1991
Chief Financial Officer X 1994
Treasurer X 1996
Steven W. Alstadt 46 Controller X 1994
Chief Accounting Officer X 1994
- -------------------------
* Member of the Executive Committee
There are no family relationships between any of the executive officers of the
Registrant.
The executive officers are elected at the organizational meeting of the Board of
Directors which follows the annual meeting of stockholders and serve for one
year and until their successors are elected and qualified.
Each of the executive officers has held the same position or other positions
with the same employer during the past five years.
Item 11. Executive Compensation
- -------- ----------------------
The sections entitled "Executive Compensation", "Executive Compensation
and Stock Option Committee Report on Executive Compensation", "Compensation
Committee Interlocks and Insider Participation", "Stock Options", "Retirement
Plans", "Incentive Agreements" and "Performance Graph" of the Company's
Definitive Proxy Statement for the Annual Meeting of Stockholders on April 26,
2001 are incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
The section entitled "Security Ownership" of the Company's Definitive
Proxy Statement for the Annual Meeting of Stockholders on April 26, 2001, is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
None.
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- ------------------------------------------------------------------------
(a) List of documents filed as part of this report:
1. Financial Statements:
Consolidated balance sheets, December 31, 2000 and 1999
Consolidated statements of operations for each of the years in
the three-year period ended December 31, 2000
Consolidated statements of cash flows for each of the years in
the three-year period ended December 31, 2000
Consolidated statements of shareholders' equity for each of the
years in the three-year period ended December 31, 2000
Notes to consolidated financial statements
Independent Auditors' Report
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:
3(a) Restated Certificate of Incorporation of the Company, as
amended. (Incorporated by reference to Exhibit 3(a) to
Furniture Brands International, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996.)
3(b) By-Laws of the Company revised and amended to May 6, 1998.
(Incorporated by reference to Exhibit 3(a) to Furniture
Brands International, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998.)
3(c) Rights Agreement, dated as of July 30, 1998, between the
Company and Bank of New York, as Rights Agent. (Incorporated
by reference to Exhibit 4(b) to Furniture Brands
International, Inc.'s Quarterly report on Form 10-Q for the
quarter ended June 30, 1998.)
3(d) Certificate of Designations, Preferences and Rights of
Series A Junior Participating Preferred Stock of the
Company. (Incorporated by reference to Exhibit 4(c) to
Furniture Brands International, Inc.'s Report on Form 10-Q
for the quarter ended June 30, 1998.)
4(a) Credit Agreement, dated as of June 7, 2000, among the
Company, Broyhill Furniture Industries, Inc., Lane Furniture
Industries, Inc., Thomasville Furniture Industries, Inc.,
Various Lenders, First Union National Bank, as Documentation
Agent, Bank of America, N.A., as Syndication Agent and
Deutsche Bank AG, New York Branch, as Administrative Agent.
(Incorporated by reference to Exhibit 4(a) to Furniture
Brands International, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2000.)
4(b) Agreement to furnish upon request of the Commission copies
of other instruments defining the rights of holders of
long-term debt of the Company and its subsidiaries which
debt does not exceed 10% of the total assets of the Company
and its subsidiaries on a consolidated basis. (Incorporated
by reference to Exhibit 4(c) to Furniture Brands
International, Inc.'s Annual Report on Form 10-K for the
year ended February 28, 1981.)
10(a)Furniture Brands International, Inc.'s 1992 Stock Option
Plan, as amended. (Incorporated by reference to Exhibit
10(a) to Furniture Brands International, Inc.'s Form 10-Q
for the quarter ended March 31, 1999.)
10(b)Furniture Brands International Inc.'s 2000 Long-Term
Incentive Plan (Incorporated by reference to Exhibit 10(b)
to Furniture Brands International, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended March 31, 1999.)
10(c)Form of Indemnification Agreement between the Company and
Richard B. Loynd, Donald E. Lasater and Lee M. Liberman.
(Incorporated by reference to Exhibit 10(h) to Furniture
Brands International, Inc.'s Annual Report on Form 10-K for
the year ended February 29, 1988.)
10(d)Written description of bonus plan for management personnel
of The Lane Company, Incorporated. (Incorporated by
reference to Exhibit 10(e) to Furniture Brands
International, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1995.)
10(e)Retirement Plan for directors. (Incorporated by reference
to Exhibit 10(g) to Furniture Brands International, Inc.'s
Annual Report on Form 10-K for the year ended December 31,
1994.)
10(f)First Amendment to Retirement Plan for Directors.
(Incorporated by reference to Exhibit 10(e) to Furniture
Brands International, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1997.)
10(g)Furniture Brands International, Inc. Executive Incentive
Plan, as amended. (Incorporated by reference to Exhibit
10(g) to Furniture Brands International, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1999.)
10(h)Broyhill Furniture Industries, Inc. Executive Incentive
Plan. (Incorporated by reference to Exhibit 10(i) to
Furniture Brands International, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1994.)
10(i)Thomasville Furniture Industries, Inc. Executive Incentive
Plan (Incorporated by reference to Exhibit 10(j) to
Furniture Brands International, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1996.)
10(j)Employment Agreement, dated as of April 29, 1997, between
Action Industries, Inc. and John T. Foy. (Incorporated by
reference to Exhibit 10(d) to Furniture Brands International
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997.)
10(k)Employment Agreement, dated as of January 1, 1999, between
the Company and Wilbert G. Holliman. (Incorporated by
reference to Exhibit 10(j) to Furniture Brands
International, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1998.)
10(l)Employment Agreement, dated as of August 1, 1996, between
the Company and Lynn Chipperfield. (Incorporated by
reference to Exhibit 10(c) to Furniture Brands International
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996.)
10(m)Employment Agreement, dated as of August 1, 1996, between
the Company and David P. Howard. (Incorporated by reference
to Exhibit 10(d) to Furniture Brands International Inc.'s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996.)
10(n)Employment Agreement, dated as of January 1, 2000 between
the Company and Richard B. Loynd. (Incorporated by reference
to Exhibit 10(n) to Furniture Brands International, Inc.'s
Annual Report on Form 10-K for the year ended December 31,
1999.)
10(o)Employment Agreement, dated as of January 29, 1998, between
Thomasville Furniture Industries, Inc. and Christian J.
Pfaff. (Incorporated by reference to Exhibit 10(o) to
Furniture Brands International Inc.'s Annual Report on Form
10-K for the year ended December 31, 1997.)
10(p)Employment Agreement, dated as of January 1, 1999, between
Broyhill Furniture Industries, Inc. and Dennis R. Burgette.
(Incorporated by reference to Exhibit 10(p) to Furniture
Brands International, Inc's Annual Report on Form 10-K for
the year ended December 31, 1998.)
10(q)Form of Agreement Not To Compete between the Company and
Wilbert G. Holliman, Dennis R. Burgette, John T. Foy,
Christian J. Pfaff, David P. Howard, Lynn Chipperfield and
Steven W. Alstadt. (Incorporated by reference to Exhibit
10(r) to Furniture Brands International, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1998.)
21 List of Subsidiaries of the Company
23 Consent of KPMG LLP
99(a)Distribution and Services Agreement, dated November 17,
1994, between the Company and Converse Inc. (Incorporated by
reference to Exhibit 99(a) to Furniture Brands
International, Inc.'s Annual Report on Form 8-K, dated
December 2, 1994.)
99(b)Tax Sharing Agreement, dated November 17, 1994, between the
Company and Converse Inc. (Incorporated by reference to
Exhibit 99(b) to Furniture Brands International, Inc.'s
Annual Report on Form 8-K, dated December 2, 1994.)
99(c)Amendment to Tax Sharing Agreement, dated as of February
21, 1996, between the Company and Converse Inc.
(Incorporated by reference to Exhibit 99(e) to Furniture
Brands International, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1996.)
(b) Reports on Form 8-K.
A Form 8-K was filed on December 15, 2000 announcing projections of fourth
quarter sales and earnings. A Form 8-K was filed on January 25, 2001
announcing fourth quarter operating results and a Form 8-K was filed on
February 23, 2001 announcing projections of first quarter sales and
earnings.
SHAREHOLDERS REQUESTING COPIES OF EXHIBITS TO FORM 10-K WILL BE SUPPLIED
ANY OR ALL SUCH EXHIBITS AT A CHARGE OF TEN CENTS PER PAGE.
FURNITURE BRANDS INTERNATIONAL, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedule
Page
No.
----
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2000 and 1999 17
Consolidated Statements of Operations for each of the years in the three- 18
year period ended December 31, 2000
Consolidated Statements of Cash Flows for each of the years in the three- 19
year period ended December 31, 2000
Consolidated Statements of Shareholders' Equity for each of the years in 20
the three-year period ended December 31, 2000
Notes to Consolidated Financial Statements 21
Financial Statement Schedule 32
Independent Auditors' Report 37
Consolidated Financial Statement Schedules:
Schedule
Valuation and qualifying accounts II 36
Schedule II
FURNITURE BRANDS INTERNATIONAL, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
(Dollars in Thousands)
---------------------------------------------------------------------
Additions
Balance at Charged to Deductions Balance at
Beginning Costs and from End of
Description of Period Expenses Reserves Period
Year Ended December 31, 2000
Allowances deducted from receivables on balance
sheet:
Allowance for doubtful accounts $15,960 $12,002 $(10,056)(a) $17,906
Allowance for cash discounts/
chargebacks/other 3,097 3,470 (1,398)(b) 5,169
------- ------- -------- -------
$19,057 $15,472 $(11,454) $23,075
======= ======= ======== =======
Year Ended December 31, 1999
Allowances deducted from receivables on balance
sheet:
Allowance for doubtful accounts $15,293 $ 2,362 $(1,695)(a) $15,960
Allowance for cash discounts/
chargebacks/other 3,040 1,364 (1,307)(b) 3,097
------- ------- -------- -------
$18,333 $ 3,726 $(3,002) $19,057
======= ======= ======== =======
Year Ended December 31, 1998
Allowances deducted from receivables on balance
sheet:
Allowance for doubtful accounts $11,765 $ 5,054 $ (1,526)(a) $15,293
Allowance for cash discounts/
chargebacks 2,028 1,555 (543)(b) 3,040
------- ------- -------- -------
$13,793 $ 6,609 $ (2,069) $18,333
======= ======= ======== =======
(a) Uncollectible accounts written off, net of recoveries.
(b) Cash discounts taken by customers and claims allowed to customers.
See accompanying independent auditors' report.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Furniture Brands International, Inc.:
We have audited the accompanying consolidated balance sheets of Furniture
Brands International, Inc. and subsidiaries as of December 31, 2000 and 1999,
and the related consolidated statements of operations, shareholders' equity,
cash flows and the related financial statement schedule for each of the years in
the three-year period ended December 31, 2000. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's 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 auditing standards generally
accepted in the United States of America. 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. and subsidiaries as of December 31, 2000 and 1999,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG LLP
St. Louis, Missouri
January 25, 2001
SIGNATURES
Pursuant to the requirements of Section 13 or 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.
(Registrant)
By Wilbert G. Holliman
------------------------
Wilbert G. Holliman
Chairman of the Board,
President and Chief
Executive Officer
Date: March 29, 2001
Pursuant to the requirement 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 indicated on March 29, 2001.
Signature Title
--------- -----
/s/ Wilbert G. Holliman President and Director
- ----------------------------- (Principal Executive Officer)
/s/ Katherine Button Bell Director
- -----------------------------
/s/ Bruce A. Karsh Director
- -----------------------------
/s/ Donald E. Lasater Director
- -----------------------------
/s/ Lee M. Liberman Director
- -----------------------------
/s/ Richard B. Loynd Director
- -----------------------------
/s/ Malcolm Portera Director
- -----------------------------
/s/ Albert E. Suter Director
- -----------------------------
Signature Title
--------- -----
/s/ David P. Howard Vice-President and Treasurer
- ----------------------------- (Principal Financial Officer)
/s/ Steven W. Alstadt Controller
- ----------------------------- (Principal Accounting Officer)