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Furniture Brands sales slip 5.4% in 4th qtr.

By Jay McIntosh -- Furniture Today, January 30, 2005

St. Louis — Furniture Brands International said its fourth-quarter sales dropped 5.4% from a year ago and net income slipped 1.2%.

Earnings per share, however, beat Wall Street estimates and rose 5% for the quarter, partly because the company bought back another half million shares.

For the full year, the largest U.S. furniture manufacturer said sales crept up 0.3% to $2.4 billion and net income dipped 3.2% to $91.6 million. Earnings per share slipped by 2 cents to $1.66.

In a conference call with analysts, Chairman and CEO Mickey Holliman said global political troubles continue to dampen demand for FBI products.

"The consumer still appears wary of making big-ticket purchases when the situation appears so uncertain," he said.

Fourth-quarter sales amounted to $583.3 million and net income was $22.3 million. Earnings were 42 cents per share, up from 40 cents and about 6 cents better than analysts were predicting, according to Reuters Estimates.

Holliman said Furniture Brands continues to pursue two strategies that have shaped its business for the past few years — opening more dedicated stores, mainly with independent dealers, and stepping up global sourcing of products.

The company opened a net 39 stores dedicated to its Thomasville, Lane, Broyhill, Drexel Heritage and Henredon brands last year, and is looking at a net gain of 59 in 2005, he said. About 44% of the company's 2004 sales went through dedicated stores, up from 39% the previous year.

Despite the growing reliance on dedicated stores, FBI still took a $40 million hit last year from the failure of a big independent customer, the Breuners Home Furnishings Corp. chain. Holliman doesn't see any more big failures on the horizon this year, with large retail chains "in fairly good shape after the shakeout we've seen since 2000."

In sourcing, the company reported that 34% of its sales came from imported goods last year, up from 26.5% in 2003.

That percentage is projected to rise to 40% this year.

Despite the sluggish performance in sales and earnings, FBI executives said the company continued to have a strong cash flow last year, enabling it to buy back shares of its stock and boost its quarterly dividend by 20% without increasing long-term debt.

Those are likely to continue to be the top uses of free cash, after investments in upgrading warehouse and manufacturing facilities and in a few new company-owned stores, Holliman said.

He hinted that Furniture Brands might close one or more U.S. plants this year, but didn't offer specifics. Factory utilization rates didn't improve in 2004's second half, and the company will continue to watch costs, he said.

Rising revenues could forestall a plant closure, he added, but that isn't expected to happen in the first quarter. Holliman said current projections are that sales will be down in the mid-single digits from year-ago levels.

Furniture Brands International
Owns Broyhill, Drexel Heritage, Henredon, Lane, Maitland-Smith and Thomasville
Earnings per share are fully diluted, and all figures in parentheses are losses or declines.
Quarter ended 12/31	2004	2003	Change
(a) Based on average shares outstanding of 53.5 million in the 2004 quarter, 56.5 million in the 2003 quarter, 55.2 million in the 2004 year and 56.3 million in the 2003 year.
Sales	$583,272,000	$616,862,000	(5.4%)
Operating income	49,354,000	52,158,000	(5.4%)
Net income	22,333,000	22,612,000	(1.2%)
Earnings per share (a)	0.42	0.40	5.0%
Year ended 12/31	2004	2003	Change
Sales	$2,375,275,000	$2,367,738,000	0.3%
Operating income	204,706,000	216,049,000	(5.3%)
Net income	91,567,000	94,573,000	(3.2%)
Earnings per share (a)	1.66	1.68	(1.2%)

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FBI 4Q sales down 5.4%

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