FBI 1Q earnings up 14.4%
By Powell Slaughter -- Furniture Today, May 2, 2004
ST. LOUIS — ST. LOUIS — No. 1 U.S. manufacturer Furniture Brands International reported first-quarter sales of $658.5 million and net income of $33.2 million, increases of 7.3% and 14.4%, respectively, over last year's initial period.
"We are generally pleased with our first quarter," said Mickey Holliman, chairman and CEO. "Both our sales and net earnings represented records for the company, and all financial results exceeded budgeted expectations. This positive year-over-year performance was across substantially all of our operating companies."
Since first-quarter 2003 orders were off almost 7% from the prior year, FBI doesn't expect second-quarter sales growth to match this year's first quarter. It anticipates second-quarter sales will grow 4% to 5%.
Holliman was especially pleased with sales growth at FBI's high-end companies — Henredon, Drexel Heritage, Thomasville and Maitland-Smith.
"The upper end of our industry has been hard hit over the past three years, and the improvement in business at those companies is indicative of an improving economy, which will help each of our operating companies," he said. "Our midpriced companies, Broyhill and Lane, also showed increases over last year, despite much more difficult comparisons."
FBI had $98.3 million in cash and cash equivalents at the end of the first quarter, despite a first-quarter pension plan contribution of $15 million and the repurchase of $13 million in common stock. That compares to $72 million in cash at the end of 2003.
Holliman said interest on long-term debt had been stabilized by interest rate swaps. "Our long-term debt, at about $300 million, remains at its target level," he said. "Starting in the third quarter this year, the annual effective interest rate on long-term debt will approximate 4% for the next three years."
Higher energy, steel and wood costs have brought industry deflationary trends to a halt, he said, noting that while those increases are indicative of a good economy, FBI hopes they won't put the brakes on consumer spending.
FBI's currently has over 200 dedicated stores — 148 for Thomasville, 43 for Drexel Heritage, four for Lane and three each for Broyhill and Henredon — with growth plans on track. Stores set to open this year include 25 Thomasville, 15 Drexel Heritage, 10 Lane, seven Broyhill and four Henredon, including four or five company-owned stores in areas with weak retail penetration.
On the antidumping petition involving Chinese wood bedroom imports, Holliman reiterated FBI's opposition to duties. Whatever the outcome, he expects no significant impact on FBI's strategy, with any duties affecting less than 5% of the company's total product line.
"This company will be the beneficiary of the continuing globalization of our business," he said.
FBI took a $1.6 million charge in the first quarter related to the closure of two Drexel Heritage plants, and will take another related $4 million charge in the second quarter. Holliman said no further plant closings are planned this year, and took issue with reports the company had curtailed investment in technology and other upgrades for its domestic operations.
"We'll make between $40 million and $45 million in capital expenditures this year to develop and maintain our manufacturing processes," he said. While importing gets the blame for job losses, improved productivity through better technology has contributed to lower employment, he said.
| Furniture Brands International | |||
|---|---|---|---|
| Owns Broyhill, Drexel Heritage, Henredon, Lane, Maitland-Smith and Thomasville | |||
| Earnings per share are fully diluted. | |||
| Quarter ended 3/31 | 2004 | 2003 | Change |
| Sales | $658,531,000 | $613,844,000 | 7.3% |
| Operating income | 68,843,000 | 63,157,000 | 9.0% |
| Net income | 33,209,000 | 29,041,000 | 14.4% |
| Earnings per share (a) | 0.58 | 0.52 | 11.5% |
| (a) Based on average shares outstanding of 57.1 million in the 2004 quarter and 56 million in the 2003 quarter. | |||
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