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 (Fee required)
          For the fiscal year ended December 31, 1996 or
                                    -----------------

     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
     EXCHANGE ACT
     OF 1934 (No fee required)
     For the transition period from                  to                  .
                                    ---------------     -----------------
     Commission file number I-91
                            ----


                          Furniture Brands International, Inc.             
     ---------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

            Delaware                                      43-0337683 
     --------------------------------                  ----------------
     (State or other jurisdiction of                   (I.R.S. Employer
      incorporation or organization)                    Identification No.)

     101 South Hanley Road, St. Louis, Missouri               63105    
     ------------------------------------------        -------------------
     (Address of principal executive offices)               (Zip Code)

     Registrant's telephone number, including area code   314/863-1100   
                                                        ------------------  

             SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                                   Name of each exchange on
                Title of each class                    which registered    
                -------------------                ------------------------
       Common Stock - $1.00 Stated Value           New York Stock Exchange

             SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                                     None
     --------------------------------------------------------------------
                               (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, <PAGE>





     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 [X]

          The aggregate market value of the voting stock held by
     non-affiliates of the registrant as of February 28, 1997, was
     approximately $561,692,582.


                APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                    PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

          Indicate by check mark whether the registrant has filed all
     documents and reports required to be filed by Section 12, 13, or 15(d)
     of the Securities Exchange Act of 1934 subsequent to the distribution
     of securities under a plan confirmed by a court. YES   X    NO 
                                                          -----     ------  
          
          Indicate the number of shares outstanding of each of the
     registrant's classes of common stock, as of the latest practicable
     date. 

                        61,466,066 shares as of February 28, 1997

                            DOCUMENTS INCORPORATED BY REFERENCE

     Portions of Definitive Proxy Statement for Annual Meeting
           of Stockholders on April 29, 1997...............      Part III<PAGE>





                                     PART I
                                     ------

     Item 1. Business
     ----------------


     (c)  Narrative Description of Business
        
     Furniture Brands International, Inc., the largest manufacturer of
     residential furniture in the United States, markets its products
     through its three operating subsidiaries: Broyhill Furniture
     Industries, Inc.; The Lane Company, Incorporated; and Thomasville
     Furniture Industries, Inc. 

     PRODUCTS
     --------
      
     The Company manufactures and distributes (i) case goods, consisting of
     bedroom, dining room and living room furniture, (ii) occasional
     furniture, consisting of wood tables and accent items and freestanding
     home entertainment centers and home office items, (iii) stationary
     upholstery products, consisting of sofas, loveseats, sectionals and
     chairs and (iv) recliners, motion furniture and sleep sofas. The
     Company's brand name positioning by price and product category are
     shown below.
<TABLE>
<CAPTION>
     <S>                   <C>             <C>           <C>            <C>               

                                                                 UPHOLSTERY
                                                        -------------------------
                                                                        MOTION/
     PRICING CATEGORY      CASE GOODS     OCCASIONAL    STATIONARY      RECLINER
     ----------------      ----------     ----------    ----------    ----------
     PREMIUM               Thomasville    Thomasville   Thomasville
                           Lane                         Lane          Lane

     BEST                  Thomasville    Thomasville   Thomasville   Thomasville
                           Lane           Lane          Lane          Lane
                                          Broyhill

     BETTER                Lane           Lane          Lane          Lane
                           Broyhill       Broyhill      Broyhill      Broyhill

     GOOD                  Broyhill       Broyhill      Broyhill      Lane

     PROMOTIONAL           Founders

     RTA                   CreativeInteriors
</TABLE>
      


     BROYHILL FURNITURE INDUSTRIES
      
     Broyhill produces collections of medium price bedroom, dining room,
     upholstered and occasional furniture aimed at middle-income consumers. <PAGE>



     Broyhill's wood furniture offerings consist primarily of bedroom,
     dining room and living room furniture, occasional tables, accent items
     and free-standing home entertainment centers. 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 colonial, country, traditional and contemporary styles.
      
     The widely recognized Broyhill trademarks include Broyhill, Broyhill
     Premier and Highland House. The flagship Broyhill product line
     concentrates on bedroom, dining room, upholstered and occasional
     furniture designed for the "good" and "better" price categories. The
     Broyhill Premier product line enjoys an excellent reputation for
     classically styled, complete furniture collections in the "better"
     price category.  Highland House also manufactures upholstered products
     in the "better" and "best" price category. 
      
     THE LANE COMPANY
      
     Lane manufactures and markets a broad range of high quality furniture
     targeting the "better," "best" and "premium" price categories. Lane
     targets niche markets with its seven operating divisions, which
     participate in such segments of the residential furniture market as
     19th century reproductions, motion furniture, wicker and rattan, cedar
     chests and finely tailored upholstered furniture. 

     Action Industries, a subsidiary of Lane, 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. Lane's Royal
     Development Company designs and manufactures the mechanisms used in
     Action Industries' reclining furniture products. 
      
     The Lane division of Lane manufactures and sells cedar chests,
     occasional living  room tables, bedroom and dining room furniture,
     wall systems, desks, console tables and mirrors and other occasional
     wood pieces.  The Lane division furniture is sold in the "better" and
     "best" price categories.

     The Hickory Chair division manufactures and markets traditional styles
     of upholstered furniture, dining room chairs 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 more recently the Mount Vernon collection,
     which features reproductions from George Washington's home. 
      
     The Pearson division 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 manufactures the Viceroy collection, which features fine
     furnishings from the award winning designer Victoria Moreland. Pearson
     furniture sells in the "premium" price category and is distributed to
     high-end furniture stores and interior designers.

     The Venture Furniture division manufactures and markets moderately
     priced  wicker, rattan and bamboo upholstered furniture, tables,
     occasional wood pieces and other home furnishing accessories. The
     division manufactures a line of outdoor and patio furniture featuring
     fast drying upholstered cushions under the name WeatherMaster, which
     has developed significant consumer acceptance.

     The Lane Upholstery division includes two product lines, one of which
     is composed of contemporary and modern upholstered furniture and metal
     and glass occasional and dining tables, and the other of which is
     composed of traditional and contemporary upholstered furniture,
     primarily sofas, loveseats, chairs and ottomans.

     Hickory Business Furniture manufactures and sells a line of office
     furniture, including chairs, tables, conference tables, desks and
     credenzas, in the upper-medium price range.
      
     THOMASVILLE FURNITURE INDUSTRIES

     Thomasville manufactures and markets wood furniture, upholstered
     products and RTA/promotional furniture. Thomasville markets its
     products primarily under the Thomasville brand name. Thomasville
     offers an assortment of upholstery 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 Contemporary. Upholstery style is
     determined by both frame style and fabric or leather selection.
     Thomasville's frame assortment allows the consumer to select from over
     90 different styles within the general style categories, and as much
     as 45% of the Thomasville fabric offering changes in a 12 month
     period, insuring that the latest styles are available.
      
     Thomasville's Founders division offers assembled bedroom sets,
     bookcases and home entertainment centers as well as RTA (ready-to-
     assemble) furniture consisting of home entertainment centers, audio
     cabinets, television/VCR carts, room dividers, bookcases, bedroom and
     kitchen/utility furniture, microwave carts, computer desks and storage
     armoires. These lines are produced in highly automated facilities. 
     Thomasville's Founders division markets products under the
     CreativeInteriors (RTA)and Founders (assembled)brand names to a
     variety of retailers for sale to consumer end-users and certain
     contract customers. 
      
     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<PAGE>





     distribution channels.  The Company continues to explore opportunities
     to expand international sales and to distribute through
     non-traditional channels such as electronic retailers, wholesale
     clubs, catalog retailers and television home shopping.

     The Company's breadth of product and national scope of distribution
     enable it to service effectively national retailers such as J.C.
     Penney, Sears and Heilig-Meyers and key regional retailers such as
     Haverty's, Breuner's Home Furnishings Corp. and Roberds.  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
     independently-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 approximately 80 free-standing stores, more than 860
     galleries and more than 420 furniture centers.
      
     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.
      
     The 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.  Management is currently evaluating
     similar opportunities to jointly market Broyhill, Lane and Thomasville
     products in dealer-owned retail stores.

     Showrooms for the national furniture market are located in High Point,
     North Carolina and for regional markets in Dallas, Texas; Atlanta,
     Georgia; Chicago, Illinois; 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 more
     than 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. <PAGE>





     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 approximately 420 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 become participants
     in the Broyhill Showcase Gallery Program.

     THE LANE COMPANY
      
     Lane distributes its products nationally 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 Haverty's and Art Van, and
     department store companies such as J.C. Penney, Sears, May Department
     Stores, Federated Department Stores and Dillard Department Stores. 

     Lane has an established specialty gallery program with more than 285
     participating dealers.  This includes over 180 dealer-owned Comfort
     Showcase Galleries established by Action Industries beginning in
     October 1995.  The Action Industries galleries average approximately
     3,500 square feet of retail space specifically dedicated to the
     display, promotion and sale of Action Industries' products.  Lane's
     other gallery programs call for the display of Lane case goods and
     upholstered furniture in settings that range from less than 3,000 to
     approximately 5,000 square feet.

     THOMASVILLE FURNITURE INDUSTRIES
      
     Thomasville products are offered at more than 630 independently-owned
     retail locations, including more than 245 Thomasville Galleries,
     approximately 80 Thomasville Home Furnishings stores and more than 300
     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<PAGE>





     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. 

     Thomasville's Founders division sells promotional and RTA 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 Wal-Mart and Levitz, as well as independent furniture stores.
     Promotional furniture is also sold in the hospitality and health care
     markets of Thomasville's contract business. RTA customers 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 customer segments through
     leading shelter magazines and popular magazines such as Sports
     Illustrated, People and Reader's Digest.  Each operating company uses
     focused advertising in major markets to create buying urgency around
     specific sale and 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 customers utilizing
     information from databases and from callers to each operating
     company's toll-free telephone number. Each of the operating companies
     also advertises selectively on television in conjunction with dealers,
     and Action Industries and Thomasville also use television advertising
     independently.


     BROYHILL FURNITURE INDUSTRIES
      
     Broyhill's advertising programs focus on translating its strong
     consumer awareness into increased sales.  Broyhill's current marketing
     strategy features a national print advertising program in addition to
     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
     customer 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.<PAGE>





     THE LANE COMPANY
      
     Lane became a well-known brand name through Lane's initial use in the
     1920s of creative advertising to promote its cedar chests. Since then,
     Lane has continued to use advertising programs to generate consumer
     awareness of the Lane brand name. Through Lane's in-house advertising
     agency, recent programs have been developed for print campaigns in
     national publications such as Country Home, Country Living, House
     Beautiful and Architectural Digest. Action Industries is engaged in
     selective national and regional television advertising. 

     The Lane Keepsake program enables the 1,100 participating dealers to
     establish early personal contact with a large number of women who are
     about to enter the bridal market as potential buyers of home
     furnishings. Information regarding a graduation gift of a miniature
     Lane cedar chest, available at the local participating furniture
     store, is sent to the parents of graduating high school women. This
     Keepsake program is believed to be instrumental in building consumer
     recognition and promoting the Lane brand name. 

     Lane markets its products through the use of well-known designers and
     affiliation with institutions. For example, Lane has teamed up with
     widely recognized designers such as Raymond Waite, Mark Hampton,
     Dakota Jackson, Blake Tovin and Sandra Nunnerley as well as design
     institutions such as the American Museum of Folk Art in New York, to
     design and market furniture collections.
      

     THOMASVILLE FURNITURE INDUSTRIES
      
     Thomasville's current advertising campaign, appearing in household
     magazines and periodic television commercials, emphasizes Thomasville
     fashion and quality leadership through the use of dramatic photographs
     featuring individual, high quality wood and upholstery pieces. 
     Thomasville ads appear in up-front positions in national household
     magazines, such as Better Homes and Gardens, Good Housekeeping and
     House Beautiful. 
      
     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 for stores that sell only Thomasville products, and
     a complete advertising package with color newspaper layouts plus radio
     and television commercials dealers can use as supplied.  Four times
     each year, Thomasville runs national sale events to coincide with
     major industry sale periods.  These may include national television
     support on multiple cable TV networks, 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 5.0 million square feet of<PAGE>


     manufacturing and warehouse space. 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.  In 1996, Broyhill
     began full production in a state-of-the-art particleboard
     manufacturing facility that provides a captive, cost-effective source
     of high quality particleboard, a primary material used in the
     Company's products.  In 1996, Broyhill added a new upholstery
     manufacturing facility with approximately $25.0 million of annual
     production capacity.

     Lane operates 15 finished case goods and upholstery production and
     warehouse facilities in Virginia, North Carolina and Mississippi.
     Since the late 1980s, significant capital expenditures have been made
     to acquire technologically advanced manufacturing equipment which has
     increased factory productivity. In 1993, Lane's Action Industries
     subsidiary completed a new 396,000 square foot plant, located in
     Mississippi, which manufactures motion furniture as well as a new
     sleep sofa product line. This facility added approximately $100
     million of annual production capacity. The Lane division recently
     installed a state-of-the-art flat-line finishing system that produces
     quality high sheen and enhanced grain finishes. 

     Thomasville manufactures or assembles its products at 17 finished case
     goods and upholstery production and warehouse facilities located in
     North Carolina, Virginia, and Tennessee, close to sources of raw
     materials and skilled craftsmen. Each plant is specialized,
     manufacturing limited product categories, allowing longer, more
     efficient production runs and economies of scale. 
      
     The manufacturing process for Thomasville's Founders 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
     stored in an automated warehouse to provide quicker delivery to
     customers. All plant operations use automated manufacturing processes
     and inventory management systems. Ninety percent of the Founders
     division products are shipped within 14 days of production.
      
     RAW MATERIALS AND SUPPLIERS
     ---------------------------
      
     The raw materials used by the Company in manufacturing its products
     are 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.  

     The Company has no long-term supply contracts and 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 RTA and promotional 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 that the Company is in substantial compliance with
     all environmental laws. Under the provisions of the Clean Air Act
     Amendments of 1990 (the "CAA"), in December 1995, the Environmental
     Protection Agency (the "EPA") promulgated air emission standards for
     the wood furniture industry. These regulations, known as National
     Emission Standards for Hazardous Air Pollutants ("NESHAPs"), govern
     the levels of emission of certain designated chemicals into the air
     and will require that the Company reduce emissions of certain volatile
     organic compounds ("VOCs") by November 1997. Management is
     investigating and evaluating techniques to meet these standards at all
     facilities to which the NESHAPs standards will apply. While the
     Company may be required to make capital investments at some of its
     facilities to ensure compliance, the Company believes that it will
     meet all applicable requirements in a timely fashion and that the
     amount of money required to meet the NESHAP 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<PAGE>


     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 Lifestyle Furnishings International Ltd.,
     La-Z-Boy Incorporated, Ladd Furniture, Inc., 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, 1996, the Company employed approximately 20,800
     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, 1996 aggregated approximately $206 million, compared to
     approximately $194 million as of December 31, 1995.
      
     Item 2.  Properties
     -------------------

     The Company owns or leases the following principal plants, offices and
     warehouses:

<TABLE>
<CAPTION>
     <S>                   <C>          <S>               <C>          <S>
                                                             Floor      Owned
                                         Type of             Space        or
     Division     Location               Facility          (Sq. Ft.)    Leased
     --------     --------               --------          ---------    ------
     Furniture
       Brands    St. Louis, MO          Headquarters       26,800      Leased

     Broyhill    Lenoir, NC             Headquarters      136,000      Leased

     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   381,820      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      Leased

     Broyhill    Lenoir, NC             Plant/Warehouse   252,380      Owned

     Broyhill    Taylorsville, NC       Plant/Warehouse   212,754      Owned

     Broyhill    Lenoir, NC             Plant             124,700      Leased

     Broyhill    Hickory, NC            Plant/Warehouse   215,500      Leased

     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          55,800      Leased

     Lane        Altavista, VA          Plant/Warehouse 1,091,600      Owned

     Lane        Altavista, VA          Headquarters       62,000      Owned

     Lane        Conover, NC            Plant/Warehouse   212,000      Owned

     Lane        Conover, NC            Plant/Warehouse   348,180      Owned

     Lane        Conover, NC            Plant             195,130      Owned

     Lane        Hickory, NC            Plant/Warehouse   641,214      Owned

     Lane        Hickory, NC            Plant/Warehouse   169,902      Owned

     Lane        High Point, NC         Plant             187,162      Owned

     Lane        High Point, NC         Plant/Warehouse   156,000      Owned

     Lane        Pontotoc, MS           Plant/Warehouse   352,740      Owned

     Lane        Rocky Mount, VA        Plant/Warehouse   598,962      Owned

     Lane        Verona, MS             Plant/Warehouse   395,050      Owned

     Lane        Saltillo, MS           Plant/Warehouse   567,500      Owned

     Lane        Tupelo, MS             Plant/Warehouse   396,175      Owned

     Lane        Rocky Mount, VA        Plant              50,300      Owned

     Lane        Smyrna, TN             Plant              28,300      Owned

     Thomasville Thomasville, NC        Headquarters/     256,000      Owned
                                         Showroom

     Thomasville Thomasville, NC        Plant/Warehouse   412,000      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 Brookneal, VA          Plant             195,260      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   804,000      Owned

     Thomasville Carysbrook, VA         Plant             189,000      Owned

     ------------------------
</TABLE>

     Substantially all of the owned properties listed above are encumbered
     by a first priority lien and mortgage pursuant to a secured credit
     agreement. In addition, 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<PAGE>





     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 1996 at moderate to high levels of productive capacity
     and believes that in general its facilities have the capacity, if
     necessary, to expand production to meet anticipated product
     requirements.

     Item 3.  Legal Proceedings
     --------------------------

     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
     ------------------------------------------------------------

     Not applicable.<PAGE>





                                  PART II
                                  ------

     Item 5.  Market for The Registrant's Common Equity and Related
     --------------------------------------------------------------
     Stockholder Matters
     -------------------

     As of February 28, 1997, there were approximately 3,000 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 16 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, 1995 and December 31, 1996.

     A discussion of restrictions on the Company's ability to pay cash
     dividends is included in Note 9 to the consolidated financial
     statements of the Company.<PAGE>





     Item 6. Selected Financial Data
     -------------------------------
<TABLE>
<CAPTION>
      <S>         <C>                   <C>           <C>          <C>           <C>          <C>           <C> <C>

                                            FIVE YEAR CONSOLIDATED FINANCIAL REVIEW

    ----------------------------------------------------------------------------------------------------------------------
    (Dollars in thousands, except per                 Year Ended December 31,                      Five Months Ended(1)      
     share data                        -------------------------------------------------   --------------------------------
                                                                                               Dec. 31,     /       Aug. 2,
                                             1996         1995         1994         1993          1992      /         1992 
    --------------------------------------------------------------------------------------------------------/--------------
    Summary of Operations:                                                                                  /
      Net sales                         $1,696,795    $1,073,889  $1,072,696     $980,532     $394,873      /  $   356,705
      Gross profit                         431,473       291,237     298,712      275,323      108,858      /       96,849
      Interest expense                      45,217        33,845      37,886       38,621       16,358      /       29,689
      Earnings before income tax                                                                            /
        expense (benefit), discontinued                                                                     /
        operations, extraordinary item                                                                      /
        and cumulative effect of                                                                            /
        accounting change                   88,292        57,038      48,841       37,266       18,045      /      247,716
    Income tax expense (benefit)            34,070        22,815      20,908       15,924        6,807      /       (1,206)
      Net earnings from continuing                                                                          /
        operations                          54,222        34,223(2)   27,933       21,342       11,238      /      248,922 
      Discontinued operations                    -             -      10,339       24,026       10,088      /     (136,347)
      Extraordinary item                    (7,417)       (5,815)          -            -            -      /    1,075,466   
      Cumulative effect of accounting                                                                       /
        change                                   -             -           -            -            -      /       (1,719)
    Net earnings                        $   46,805    $   28,408   $  38,272     $ 45,368     $ 21,326      /   $1,186,322
                                                                            /
    Per share of common stock -                                                                             /
        fully diluted:                                                                                      /
        Net earnings from                                                                                   /
          continuing operations         $     0.86    $     0.65(2)$    0.54     $   0.41     $   0.23      /   $     6.42 
        Discontinued operations                  -             -        0.20         0.47         0.20      /        (3.52)    
    Extraordinary item                       (0.12)        (0.11)          -            -            -      /        27.72
        Cumulative effect of accounting                                                                     /
          change                                 -             -           -            -            -      /        (0.04)
        Net earnings                    $     0.74    $     0.54   $    0.74     $   0.88     $   0.43      /   $    30.58
    Weighted average common and common                                                                      /
        equivalent shares outstanding -                                                                     /
        fully diluted (in thousands)        62,871        52,317      51,506       51,397       50,000      /       38,796         
                                                                                                            /
    Other Information (continuing                                                                           /
      operations):                                                                                          /
      Working capital                   $  462,661    $  455,036   $ 308,323     $271,588     $261,967      /   $  261,357
      Property, plant and equipment, net   301,962       306,406     181,393      191,581      186,046      /      189,039
      Capital expenditures                  40,344        35,616     21,108        30,197        8,850      /        7,041
      Total assets                       1,269,204     1,291,739    881,735       858,163      870,115      /      893,012
      Long-term debt                       572,600       705,040    409,679       403,255      407,898      /      443,165 
      Shareholders' equity              $  419,657    $  301,156   $275,394      $338,557     $293,114      /   $  275,400 
    --------------------------------------------------------------------------------------------------------/--------------


  (1)  Effective December 31, 1992, the Company changed its fiscal year to end on
       December 31.  The Company's adoption of fresh-start reporting required
       reporting calendar 1992 results in two 22 week periods.

  (2)  Net earnings from continuing operations before gain on insurance
       settlement, net of income tax expense, and net earnings per common share
       from continuing operations before gain on insurance settlement, net of
       income tax expense, were $29,463 and $0.56, respectively.
</TABLE>

<PAGE>





     Item 7. Management's Discussion and Analysis of Financial Condition
     -------------------------------------------------------------------
     and Results of Operations
     --------------------------

                        
                        MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     GENERAL
     -------

          The following analysis of the results of operations and financial
     condition of the Company should be read in conjunction with the
     consolidated financial statements and related notes included elsewhere
     in this document.  In addition, management believes that the following
     factors have had a significant effect on its recent financial
     statements.

          Acquisition of Thomasville.  During the year ended December 31,
     1995, the Company had two primary operating subsidiaries, Broyhill and
     Lane.  On December 29, 1995, the Company acquired Thomasville.  The
     transaction was accounted for as a purchase and, since the acquisition
     occurred as of the last business day of 1995, was reflected in the
     Company's consolidated balance sheet as of December 31, 1995.  The
     Company's results of operations for 1995 do not include any of the
     operations of Thomasville.  The cash portion of the acquisition of
     Thomasville was originally financed through funds obtained by
     borrowing under the Company's Secured Credit Agreement and the
     Receivables Securitization Facility.  On March 1, 1996, the Company
     completed a public offering of 10,000,000 shares of common stock,
     generating net cash proceeds of approximately $81.3 million, which
     were used to repay a portion of this debt.

          1994 Spin-Off Transactions.  In order to focus on its core
     furniture operations, the Company completed a spin-off of its footwear
     subsidiaries in 1994.  On November 17, 1994, the Company
     simultaneously refinanced the majority of its outstanding indebtedness
     and distributed to its shareholders all of the stock of its former
     footwear subsidiaries, Converse Inc. and The Florsheim Shoe Company. 
     Upon completion of this restructuring, the Company retained no
     ownership interest in or management control of the footwear
     businesses.  Accordingly, the financial results of the footwear
     businesses have been reflected as discontinued operations for all
     applicable periods.

          1992 Asset Revaluation (Fresh-Start Reporting).  Included in the
     Company's statements of operations are depreciation and amortization
     charges related to adjustments of assets and liabilities to fair value
     made in 1992.  These adjustments are a result of the Company's 1992
     reorganization and the adoption of AICPA SOP 90-7, "Financial
     Reporting by Entities in Reorganization under the Bankruptcy Code"
     (commonly referred to as "fresh-start" reporting) and are not the
     result of historical capital expenditures.<PAGE>





     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 1996, 1995
     and 1994.  The results for 1995 and 1994 do not include any of the
     operations of Thomasville.
<TABLE>
       <S>         <C>    <C>         <C>     <C>         <C>     <C>       <C>

     ----------------------------------------------------------------------------
     (Dollars in millions)                   Year Ended December 31,         
                          -------------------------------------------------------
                                 1996                1995                1994
                          -----------------   ----------------    --------------- 
                                   % of Net            % of Net          % of Net
                            Dollars    Sales    Dollars    Sales    Dollars Sales
     ---------------------------------------------------------------------------- 
       Net sales          $1,696.8   100.0%   $1,073.9   100.0%   $1,072.7 100.0%
       Cost of operations  1,228.4    72.4       760.4    70.8       752.5  70.2
         Selling, general and
         administrative
         expenses            283.4    16.7       198.3    18.5       199.3  18.6
       Depreciation and
       amortization           54.1     3.2        36.1     3.3        35.8   3.3 
     ---------------------------------------------------------------------------- 
       Earnings from
         operations          130.9     7.7        79.1     7.4        85.1   7.9
       Interest expense       45.2     2.7        33.9     3.2        37.9   3.5
       Other income, net:
         Gain on insurance
           settlement            -       -         7.9     0.7           -     -
       Other                   2.6     0.2         3.9     0.4         1.6   0.1 
     ----------------------------------------------------------------------------
       Earnings before income tax
          expense, discontinued
          operations and
          extraordinary item  88.3     5.2        57.0     5.3        48.8   4.5 
     Income tax expense       34.1     2.0        22.8     2.1        20.9   1.9 
     ----------------------------------------------------------------------------
     Net earnings from
       continuing
       operations         $   54.2     3.2%   $   34.2     3.2%   $   27.9   2.6%
     ============================================================================
       Gross profit(1)    $  431.5    25.4%   $  291.2    27.1%   $  298.7  27.8%

</TABLE>

     (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.

<TABLE>
     <S>                               <C>            <C>           <C>

     ----------------------------------------------------------------------------
     (Dollars in millions)                     Year Ended December 31,
                              ---------------------------------------------------
                                         1996           1995          1994
                              ---------------------------------------------------

     Net sales                         $1,696.8       $1,073.9      $1,072.7
     Cost of operations                 1,228.4          760.4         752.5
     Depreciation (associated with
       cost of goods sold)                 36.9           22.3          21.5
     ----------------------------------------------------------------------------
     Gross profit                      $  431.5       $  291.2      $  298.7 
     ============================================================================
</TABLE>

     Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

          Net sales for 1996 increased to $1.7 billion from $1.07 billion
     in 1995.  The improved sales performance resulted primarily from the
     acquisition of Thomasville.  Had Thomasville been acquired at the
     beginning of 1995, net sales for 1996 would have increased 4.5% over
     pro forma net sales for 1995.  The increase in net sales was achieved
     through continued introductions of new products and emphasis on the
     Company's brand names.

          Cost of operations for 1996 was $1,228.4 million, compared to
     $760.4 million for 1995.  The large increase was the result of the
     Company's acquisition of Thomasville.  Cost of operations as a
     percentage of net sales increased from 70.8% for 1995 to 72.4% for
     1996.  This increase was due to the acquisition of Thomasville which
     had higher cost of operations as a percentage of net sales than the
     Company's other operating subsidiaries.  Had Thomasville been included
     on a pro forma basis for 1995, cost of operations as a percentage of
     net sales would have been 73.3%.

          Selling, general and administrative expenses increased to $283.4
     million for 1996 from $198.3 million in 1995.  The large increase was
     a result of the Company's acquisition of Thomasville.  As a percentage
     of net sales, selling, general and administrative expenses were 16.7%
     for 1996 compared to 18.5% for 1995, reflecting the Company's
     acquisition of Thomasville.

          Depreciation and amortization for 1996 was $54.1 million,
     compared to $36.1 million in 1995.  The large increase was a result of
     the Company's acquisition of Thomasville.  The amount of depreciation
     and amortization attributable to the "fresh-start" reporting was $16.3
     million and $15.9 million for 1996 and 1995, respectively.

          Interest expense for 1996 totaled $45.2 million, compared to
     $33.9 million for 1995.  The increase in interest expense reflects
     additional debt incurred for the acquisition of Thomasville.

          Other income, net for 1996 totaled $2.6 million compared to $3.9
     million for 1995.  For 1996, other income consisted of interest on
     short-term investments of $1.2 million and other miscellaneous income
     and expense items totaling $1.4 million.

          For 1996, the Company provided for income taxes totaling $34.1
     million on earnings before income tax expense and extraordinary item,
     producing an effective tax rate of 38.6%, compared to an effective tax<PAGE>





     rate for 1995 of 40.0%.  The effective tax rates for such periods were
     adversely impacted by certain nondeductible expenses incurred and
     provisions for state and local income taxes.

          Net earnings per common share from continuing operations on a
     fully diluted basis were $0.86 and $0.65 for 1996 and 1995,
     respectively.  Net earnings per common share from continuing
     operations before gain on insurance settlement, net of income tax
     expense, on a fully diluted basis was $0.56 for 1995.

          Weighted average shares outstanding used in the calculation of
     net earnings per common share on a primary and fully diluted basis
     were 61,946,000 and 62,871,000 in 1996, respectively, and 50,639,000
     and 52,317,000 in 1995, respectively.

          Gross profit for 1996 was $431.5 million, representing an
     increase of 48.2% over the gross profit of $291.2 million for 1995. 
     The increase resulted primarily from the acquisition of Thomasville. 
     The decrease in gross profit margin to 25.4% for 1996 from 27.1% in
     1995 was due to the acquisition of Thomasville, which had lower gross
     profit margins than the Company's other operating subsidiaries.  Had
     Thomasville been included on a pro forma basis in 1995, gross profit
     margin would have been 24.6%.

     Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

          Net sales for 1995 were $1.07 billion, approximately unchanged
     from 1994.  During 1995, residential furniture manufacturers' results
     were adversely affected by industry-wide price discounting and
     promotional activity in response to weaker demand for durable goods. 
     The Company was able to maintain comparable net sales despite these
     conditions through new product introductions at Broyhill and Lane and
     continued advertising support of its brand names.

          Cost of operations for 1995 was $760.4 million, compared to
     $752.5 million for 1994, an increase of 1.0%.  The increase in cost of
     operations as a percentage of net sales, from 70.2% in 1994 to 70.8%
     in 1995, was primarily the result of unfavorable overhead absorption
     rates reflecting the Company's effort to maintain manufacturing
     utilization rates at levels necessary to balance inventory with
     incoming orders.

          Selling, general and administrative expenses decreased to $198.3
     million in 1995 from $199.3 million in 1994, a reduction of 0.5%.  In
     1995, such expenses included a $2.7 million non-cash expense related
     to stock options.  As a percentage of net sales, selling, general and
     administrative expenses were 18.5% in 1995 compared to 18.6% in 1994,
     reflecting the Company's successful implementation of its ongoing cost
     reduction programs.

          Depreciation and amortization for 1995 was $36.1 million,
     compared to $35.8 million in 1994, an increase of 0.9%.  The amount of
     depreciation and amortization attributable to the "fresh-start"
     reporting was $15.9 million and $16.9 million in 1995 and 1994,
     respectively.

          Interest expense for 1995 totaled $33.9 million and reflects
     twelve months of interest expense on the Company's debt structure,
     which was substantially refinanced as of December 29, 1995.  Interest
     expense for 1995 was not comparable to interest expense for 1994 as a
     result of the previous refinancing of substantially all of the
     Company's debt in November 1994.

          Other income, net for 1995 totaled $11.8 million, compared to
     $1.6 million in 1994.  For 1995, other income, consisted of a gain on
     insurance settlement of $7.9 million pertaining to the November 1994
     destruction of a particleboard plant, interest income on short-term
     investments of $2.4 million and other miscellaneous income and expense
     items totaling $1.5 million.

          For 1995, the Company provided for income taxes totaling $22.8
     million on earnings before income tax expense, discontinued operations
     and extraordinary item, producing an effective tax rate of 40.0%,
     compared to an effective tax rate for 1994 of 42.8%.  The effective
     tax rates for such years were adversely impacted by certain
     nondeductible expenses incurred and provisions for state and local
     income taxes.  The effective income tax rate for 1995 was favorably
     impacted by special state income tax incentives granted in connection
     with the issuance of certain industrial revenue bonds on behalf of one
     of the Company's subsidiaries.

          Net earnings per common share from continuing operations on a
     fully diluted basis were $0.65 and $0.54 for 1995 and 1994,
     respectively.  Net earnings per common share from continuing
     operations before gain on insurance settlement, net of income tax
     expense on a fully diluted basis were $0.56 and $0.54 for 1995 and
     1994, respectively.  Weighted average shares outstanding used in the
     calculation of net earnings per common share on a primary and fully
     diluted basis were 50,639,000 and 52,317,000 in 1995, respectively,
     and 51,495,000 and 51,506,000 in 1994, respectively.

          Gross profit for 1995 was $291.2 million, compared to $298.7
     million for 1994, a decrease of 2.5%.  Gross profit as a percentage of
     net sales declined from 27.8% in 1994 to 27.1% in 1995, primarily as a
     result of lower factory utilization rates at certain of the Company's
     manufacturing facilities, reflecting the Company's effort to balance
     inventories with incoming orders.

     Financial Condition and Liquidity

     Liquidity
     --------

          Cash and cash equivalents at December 31, 1996 totaled $19.4
     million, compared to $26.4 million at December 31, 1995.  For 1996,
     net cash provided by operating activities totaled $115.4 million.  Net
     cash used by investing activities totaled $37.5 million.  Net cash
     used in financing activities totaled $84.9 million, including the net<PAGE>





     repayment of $150.3 million of long-term debt, the receipt of $81.3
     million of net proceeds from the sale of common stock pursuant to the
     March 1, 1996 equity offering, the receipt of $9.2 million from the
     exercise of warrants and stock options to purchase shares of common
     stock, $20.0 million for the repurchase of warrants and $4.5 million
     in debt issuance costs associated with the September 6, 1996
     refinancing of the secured credit agreement.

          Working capital was $462.7 million at December 31, 1996, compared
     to $455.0 million at December 31, 1995.  The current ratio was 4.2 to
     1 at December 31, 1996, compared to 4.4 to 1 at December 31, 1995. 
     The modest increase in working capital between years is primarily the
     result of the Company's focus on efficient management of individual
     working capital components.

          At December 31, 1996, long-term debt, including current
     maturities, totaled $572.6 million, compared to $723.7 million at
     December 31, 1995.  This reduction of indebtedness was funded by $81.3
     million from the March 1, 1996 equity offering, with the remainder
     funded by cash flow from operations and warrant exercise proceeds. 
     The Company's debt-to-capitalization ratio was 57.7% at December 31,
     1996, compared to 70.6% at December 31, 1995.

     Financing Arrangements
     ----------------------

          On September 6, 1996, the Company refinanced its Secured Credit
     Agreement.  The Secured Credit Agreement is a $475.0 million reducing
     revolving credit facility.  The Secured Credit Agreement allows for
     issuance of letters of credit and cash borrowings.  Letters of credit
     are limited to no more than $60.0 million.  Cash borrowings are
     limited to the facility's maximum availability less letters of credit
     outstanding.  (See Note 8 of the Notes to Consolidated Financial
     Statements for additional information.)  At December 31, 1996, there
     were $359.0 million of cash borrowings outstanding under the Secured
     Credit Agreement and $28.8 million in letters of credit outstanding,
     leaving an excess of $87.2 million available under the Secured Credit
     Agreement.

          The Receivables Securitization Facility is a $225.0 million
     facility pursuant to which the Company sells interests in the trade
     receivables of its operating companies to a third party financial
     institution.  The Company accounts for the Receivables Securitization
     Facility as long-term debt.  The Company's cost of borrowing is based
     on a commercial paper index rate plus a program fee.  At December 31,
     1996, the Company had approximately $10.0 million of excess
     availability under its Receivables Securitization Facility.

          In February 1996, in order to reduce the impact of changes in
     interest rates on its floating rate long-term debt, the Company
     entered into three year interest rate swap agreements having a total
     notional amount of $300.0 million.  The swap agreements effectively
     convert a portion of the Company's floating rate long-term debt to a
     fixed rate.  The Company pays the counterparties a fixed rate of 5.14%
     per annum and receives payment based upon the floating three month
     Eurodollar rate.

          The Company believes its Secured Credit Agreement and the
     Receivables Securitization Facility, together with cash generated from
     operations, will be adequate to meet liquidity requirements for the
     foreseeable future.<PAGE>





     Item 8.  Financial Statements and Supplementary Data
     ----------------------------------------------------
<TABLE>
<CAPTION>
      <S>               <C>                          <C>             <C>

                          CONSOLIDATED BALANCE SHEETS

  -------------------------------------------------------------------------------
  (Dollars in thousands)                            December 31,     December 31,
                                                           1996             1995
  -------------------------------------------------------------------------------
  Assets
  Current assets:
    Cash and cash equivalents                        $   19,365      $   26,412  
    Receivables, less allowances of $19,124
    ($20,724 at December 31, 1995) (Note 8)             283,417         276,116
    Inventories (Note 6)                                281,107         269,677
    Prepaid expenses and other current assets            23,378          17,888
  ------------------------------------------------------------------------------
      Total current assets                              607,267         590,093
  Property, plant and equipment:
    Land                                                 16,292          16,635
    Buildings and improvements                          172,783         166,214 
    Machinery and equipment                             236,654         206,580 
  ------------------------------------------------------------------------------
                                                        425,729         389,429 
    Less accumulated depreciation                       123,767          83,023 
  ------------------------------------------------------------------------------
      Net property, plant and equipment                 301,962         306,406 
      Intangible assets (Note 7)                        344,101         370,307 
  Other assets                                           15,874          24,933 
  ------------------------------------------------------------------------------
                                                     $1,269,204      $1,291,739 
  ==============================================================================
  Liabilities and Shareholders' Equity
  Current liabilities:
    Current maturities of long-term debt (Note 8)    $      -        $   18,639 
    Accounts payable                                     61,095          53,093 
    Accrued employee compensation                        29,864          29,020 
    Accrued interest expense                              6,579           1,304 
    Other accrued expenses                               47,068          33,001 
  ------------------------------------------------------------------------------
      Total current liabilities                         144,606         135,057 
  Long-term debt, less current maturities (Note 8)      572,600         705,040 
  Other long-term liabilities                           132,341         150,486 

  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 61,432,181 and 
      50,120,079 shares at December 31, 1996 and 
      1995 (Note 9)                                      61,432          50,120 
    Paid-in capital                                     278,554         218,156 
    Retained earnings                                    79,671          32,880 
  ------------------------------------------------------------------------------
      Total shareholders' equity                        419,657         301,156 
  ------------------------------------------------------------------------------
                                                     $1,269,204      $1,291,739 
  ===============================================================================

  See accompanying notes to consolidated financial statements.<PAGE>
</TABLE>



<TABLE>
<CAPTION>
      <S>                                  <C>   <C>    <C>   <C>     <C>   <C>

                           CONSOLIDATED STATEMENTS OF OPERATIONS
  -------------------------------------------------------------------------------
  (Dollars in thousands, except per share data)
                                                       Year Ended December 31,
                                             1996           1995          1994
  -------------------------------------------------------------------------------
  Net sales                              $1,696,795     $1,073,889    $1,072,696 
  Costs and expenses:
    Cost of operations                    1,228,355        760,393       752,528 
    Selling, general and administrative 
      expenses                              283,432        198,321       199,333 
    Depreciation and amortization 
     (includes $16,285, $15,922 and $16,900
      related to fair value adjustments)      54,082        36,104        35,776
  -------------------------------------------------------------------------------
  Earnings from operations                   130,926        79,071        85,059 

  Interest expense                            45,217        33,845        37,886 
  Other income, net:
    Gain on insurance settlement (Note 14)         -         7,882             -
    Other                                      2,583         3,930         1,668
  Earnings before income tax expense,
   discontinued operations and
    extraordinary item                        88,292        57,038        48,841 
  Income tax expense (Note 10)                34,070        22,815        20,908 
  Net earnings from continuing operations     54,222        34,223        27,933 
  Discontinued operations (Note 4):
    Earnings from operations, net of taxes         -             -        25,443 
    Loss on distribution, net of taxes             -             -       (15,104)
  -------------------------------------------------------------------------------
  Net earnings before extraordinary item      54,222        34,223        38,272 
  Extraordinary item - early extinguishment
    of debt, net of tax benefit (Note 5)      (7,417)       (5,815)            - 
  -------------------------------------------------------------------------------
  Net earnings                            $   46,805    $   28,408    $   38,272 
  ===============================================================================
  Net earnings per common share - primary (Note 3):
    Net earnings from continuing operations$    0.88    $     0.67    $     0.54 
    Discontinued operations                        -             -          0.20 
    Extraordinary item - early 
     extinguishment of debt                    (0.12)        (0.11)            - 
  -------------------------------------------------------------------------------
  Net earnings per common share - primary $     0.76    $     0.56    $     0.74 
  ===============================================================================
  Net earnings per common share - fully diluted (Note 3):
    Net earnings from continuing operations$     0.86   $     0.65    $     0.54 
    Discontinued operations                         -            -          0.20 
    Extraordinary item - early 
      extinguishment of debt                    (0.12)       (0.11)            - 
  -------------------------------------------------------------------------------
  Net earnings per common share - 
      fully diluted                        $     0.74   $     0.54    $     0.74 
  ===============================================================================


  See accompanying notes to consolidated financial statements.<PAGE>

</TABLE>



<TABLE>
<CAPTION>
    <S>                                      <C>          <C>          <C>

                         CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                              
  ----------------------------------------------------------------------------------          
  (Dollars in thousands)
                                                   Year Ended December 31,      
                                                1996         1995         1994
  -------------------------------------------------------------------------------
  Cash Flows from Operating Activities:
   Net earnings                              $ 46,805     $ 28,408     $ 38,272 
   Adjustments to reconcile net earnings
    to net cash provided by operating activities:
    Net loss on early extinguishment of debt    7,417        5,815          -   
    Net earnings from discontinued operations       -            -      (10,339)
    Depreciation of property, plant and 
      equipment                                42,022       26,371       25,675 
    Amortization of intangible and 
      other assets                             12,060        9,733       10,101 
    Noncash interest expense                    2,042        2,150          196 
    (Increase) decrease in receivables         (7,301)         165      (27,979)
      (Increase) decrease in inventories      (11,430)       3,340      (20,553)  
     Decrease in prepaid expenses and 
      intangible and other assets              13,695        1,179        2,648   
     Increase (decrease) in accounts payable,
        accrued interest expense and other
        accrued expenses                       33,710       14,794       (1,233)  
     Increase (decrease) in net deferred tax
        liabilities                            (7,972)        (211)       7,904   
     Increase (decrease) in other long-term
        liabilities                           (15,628)         246       (2,676)
     -----------------------------------------------------------------------------
    Net cash provided by continuing 
        operations                            115,420       91,990       22,016 
    Net cash used by discontinued operations        -            -      (16,695)
    ------------------------------------------------------------------------------
    Net cash provided by operating activities 115,420       91,990        5,321
   -------------------------------------------------------------------------------
   Cash Flows from Investing Activities:
    Acquisition of business (Note 2)                -     (335,438)         - 
    Proceeds from the disposal of assets        2,766          519        5,621 
    Additions to property, plant 
      and equipment                           (40,344)     (35,616)     (21,108)
  --------------------------------------------------------------------------------
    Net cash used by investing activities     (37,578)    (370,535)     (15,487)
  --------------------------------------------------------------------------------
  Cash Flows from Financing Activities:
    Payments for debt issuance costs           (4,467)     (14,026)     (11,455)
    Additions to long-term debt               380,000      576,000      423,000
    Payments of long-term debt               (530,279)    (286,574)    (404,741)  
    Proceeds from the sale of common stock     81,292            -            -
    Proceeds from the issuance of common 
      stock                                     9,290          201          698
    Payments for the repurchase of 
      common stock warrants                   (19,961)      (2,789)           -
    Payments for common stock offering expenses
      of selling shareholders                    (764)           -            -  
  -------------------------------------------------------------------------------
    Net cash provided (used) by financing 
      activities                              (84,889)     272,812        7,502 
   Net decrease in cash and cash equivalents   (7,047)      (5,733)      (2,664)
   Cash and cash equivalents at 
      beginning of period                      26,412       32,145       34,809
  -------------------------------------------------------------------------------
  Cash and cash equivalents at end of 
      period                                 $ 19,365     $ 26,412     $ 32,145
  ===============================================================================
  Supplemental Disclosure:
    Cash payments for income taxes, net      $ 33,126     $ 14,386     $ 37,127 
  ===============================================================================
    Cash payments for interest               $ 37,960     $ 32,010     $ 39,345 
  ===============================================================================

  See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
  <S>     <C>      <C> <C>                <C>      <C>          <C>      <C>

                        CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


  -------------------------------------------------------------------------------
  (Dollars in thousands)                Common    Paid-In     Retained
                                         Stock    Capital     Earnings    Total
  -------------------------------------------------------------------------------
  Balance December 31, 1993            $50,004   $226,391     $62,162   $338,557

  Net earnings                                                 38,272     38,272
  Common stock activity:
    Stock option exercises (Note 9)         71        615                    686
    Warrant exercises - 983 shares           1         11                     12
  Foreign currency translations                                 2,659      2,659
  Distribution of discontinued
    operations to shareholders                     (6,229)    (98,563)  (104,792)
  -------------------------------------------------------------------------------
  Balance December 31, 1994             50,076    220,788       4,530    275,394

  Net earnings                                                 28,408     28,408
  Common stock activity:
    Stock option exercises (Note 9)         43        153                    196
    Warrant exercises - 564 shares           1          4                      5
    Warrant purchases - 1,489,422 shares           (2,789)                (2,789)
  Foreign currency translations                                    (58)      (58)
  ------------------------------------------------------------------------------
  Balance December 31, 1995               50,120   218,156      32,880   301,156 

  Net earnings                                                  46,805    46,805
  Common stock activity:
    Sale of common stock - 
      10,000,000 shares                    10,000    71,292                81,292
    Stock option grants and exercises 
      (Note 9)                                 85     2,309                 2,394 
    Warrant exercises - 1,227,052 shares    1,227     7,522                 8,749 
    Warrant purchases - 3,578,399 shares            (19,961)             (19,961)
    Common stock offering expenses of
      selling shareholders                             (764)                (764)
  Foreign currency translations                                   (14)       (14)
  -------------------------------------------------------------------------------
  Balance December 31, 1996               $61,432  $278,54      $79,671  $419,657
  ===============================================================================


  See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>



                        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 a major manufacturer of residential furniture.  During
     the year ended December 31, 1996, the Company had three primary
     operating subsidiaries: Broyhill Furniture Industries, Inc.; The Lane
     Company, Incorporated; 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
     section.  Foreign operations and net sales are not material.

     2.  Acquisition of Business

          On December 29, 1995, the Company acquired all of the outstanding
     stock of Thomasville Furniture Industries, Inc.  The purchase price
     totaled $331,200 plus the assumption of $8,000 of long-term debt.  The
     purchase price, including capitalized expenses which approximated
     $4,200, was paid in cash.  The transaction was accounted for as a
     purchase and, since the acquisition occurred as of the last business
     day of 1995, was reflected in the Company's consolidated balance sheet
     as of December 31, 1995.  The Company's results of operations for 1995
     do not include any of the operations of Thomasville.  The total
     acquisition cost exceeded the estimated fair value of the net assets
     acquired by $93,110 with such amount being recorded as an intangible
     asset.  The determination of the final fair values of assets and
     liabilities resulted in adjustments consisting of changes from
     initially recorded values as of December 31, 1995 resulting in
     decreases in receivables, inventories, excess of cost over net assets
     acquired and other noncurrent liabilities of $3,350, $2,236, $12,654
     and $16,641, respectively.  Adjustments to other balance sheet
     accounts were individually immaterial.

          The following unaudited summary, prepared on a pro forma basis,
     combines the consolidated results of operations of the Company for
     1995 and 1994 with those of Thomasville as if the transaction had
     occurred at the beginning of each year presented.
<TABLE>
  <S>                                          <C>

  -------------------------------------------------------------------------------
                                                         Year Ended December 31,
                                                           1995            1994
  -------------------------------------------------------------------------------
  Net sales                                            $1,624,116      $1,599,339
  Net earnings from continuing operations                  37,422          30,963
  Net earnings                                             31,607          41,302
  Net earnings per common share - fully diluted:
    Continuing operations                                    0.72            0.60 
    Total                                                    0.61            0.80 <PAGE>
</TABLE>


          The pro forma data has been adjusted, net of income taxes, to
     reflect interest expense and the amortization of the excess of cost
     over net assets acquired.  Such pro forma amounts are not necessarily
     indicative of what the actual consolidated results of operations might
     have been if the acquisition had been effective at the beginning of
     each year presented.

     3.  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
     generally accepted accounting principles 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
     could differ from those estimates.

     Principles of Consolidation

          The consolidated financial statements include the accounts of the
     Company and all 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.  The
     years 1996, 1995 and 1994 all represent 52 week fiscal 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.
     Expenditures for improvements are capitalized while normal repairs and
     maintenance are expensed as incurred.  When properties are disposed
     of, the related cost and accumulated depreciation or amortization are
     removed from the accounts, and gains or losses on the dispositions are
     reflected in results of operations.  For financial reporting purposes,
     the Company utilizes both accelerated and straight-line methods of
     computing depreciation and amortization.  Such expense is computed<PAGE>





     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.  The determination of
     the final fair values of assets and liabilities resulted in
     adjustments consisting of changes from initially recorded values as of
     December 31, 1995 resulting in decreases in receivables, inventories,
     excess of cost over net assets acquired and other noncurrent
     liabilities of $3,350, $2,236, $12,654 and $16,641, respectively. 
     Adjustments to other balance sheet accounts were individually
     immaterial.  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.

     Interest Rate Swap Agreements

          Interest rate swap agreements are used by the Company to fix the
     interest rate on a portion of its floating rate long-term debt. 
     Amounts to be paid or received under the interest rate swap agreements
     are recognized in income as adjustments to interest expense.  The fair
     value of the interest rate swap agreements is not recognized in the
     consolidated financial statements since they are accounted for as
     hedges.

     Income Tax Expense

          Income tax expense is based on results of operations before
     discontinued operations and extraordinary items.  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 bases.  Deferred tax assets and liabilities are<PAGE>





     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.

     Extraordinary Item

          In conjunction with the September 6, 1996 refinancing of the
     Secured Credit Agreement, the deferred financing fees and expenses
     pertaining to the refinanced credit facility were charged to results
     of operations, as an extraordinary item.

          In conjunction with the December 29, 1995 acquisition of
     Thomasville, the Company refinanced its Secured Credit Agreement and
     amended its Receivables Securitization Facility.  As a result thereof,
     the Company charged to results of operations, as an extraordinary
     item, the deferred financing fees and expenses pertaining to such
     credit facilities.

     Net Earnings Per Common Share

          Net earnings per common share is based on the weighted average
     number of  shares of common stock and common stock equivalents
     outstanding during the year.   The stock options and warrants
     outstanding (Note 9) are considered common stock equivalents. 
     Weighted average shares used in the calculation of primary and fully
     diluted net earnings per common share for 1996 were 61,946,000 and
     62,871,000, respectively.

     Stock-Based Compensation

          Statement of Financial Accounting Standards No. 123, "Accounting
     for Stock-Based Compensation," encourages, but does not require,
     companies to record compensation cost for stock-based employee
     compensation plans at fair value.  The Company has chosen to continue
     to account for stock-based compensation using the intrinsic value
     method prescribed in Accounting Principles Board Opinion No. 25,
     "Accounting for Stock Issued to Employees."

     Reclassification

          Certain 1995 and 1994 amounts have been reclassified to conform
     to the 1996 presentation.

     4.  Discontinued Operations

          On November 17, 1994, the Company distributed the common stock of
     each of The Florsheim Shoe Company and Converse Inc. (which, in
     aggregate, represented the Company's footwear segment) to its
     shareholders.  In accordance with generally accepted accounting
     principles, the financial results for the footwear segment are
     reported as "Discontinued Operations," and the Company's financial
     results of  prior periods were restated.  Condensed results of the
     discontinued operations were as follows:


     ---------------------------------------------------------------------
                                                             Eleven Months
                                                                     Ended
                                                               November 17,
                                                                      1994
     ---------------------------------------------------------------------
     Net sales                                                    $663,637
     =====================================================================
     Earnings before income tax expense                           $ 40,047
     Income tax expense                                             14,604
     ---------------------------------------------------------------------
     Net earnings                                                 $ 25,443
     =====================================================================
     Loss on distribution, net of taxes of $4,564                 $(15,104)
     =====================================================================

          The loss on distribution reflects expenses related to: the
     distribution of the common stock of The Florsheim Shoe Company and
     Converse Inc. to the Company's shareholders, including certain
     expenses associated with establishing the capital structure of each
     company; compensation expense accrued as a result of adjustments
     required to be made to exercisable employee stock options; interest
     expense on certain long-term debt defeased, net of estimated interest
     income to be received from the trustees; and applicable income taxes.

          Prior to the distribution of the common stock of The Florsheim
     Shoe Company to its shareholders, the Company had guaranteed certain
     of Florsheim's retail store operating leases.  At December 31, 1996,
     the Company had guarantees outstanding on  85 retail store leases with
     a contingent liability totaling approximately $29,700. The Florsheim
     Shoe Company has agreed to indemnify the Company against any losses
     incurred as a result of the lease guarantees.

     5.  Extraordinary Item - Early Extinguishment of Debt

          In conjunction with the September 6, 1996 refinancing of the
     Secured Credit Agreement, the Company charged to results of operations
     $7,417, net of tax benefit of $4,469, representing the deferred
     financing fees and expenses pertaining to the refinanced facility. 
     The charge was recorded as an extraordinary item.

          In conjunction with the December 29, 1995 acquisition of
     Thomasville, the Company refinanced its Secured Credit Agreement and
     amended its Receivables Securitization Facility.  As a result thereof,
     the Company charged to results of operations $5,815, net of tax
     benefit of $3,478, representing the deferred financing fees and
     expenses pertaining to such credit facilities.  The charge was
     recorded as an extraordinary item.<PAGE>


     6.  Inventories

          Inventories are summarized as follows:

     ---------------------------------------------------------------------
                                                December 31,   December 31,
                                                       1996           1995
     ---------------------------------------------------------------------
     Finished products                             $127,292       $114,857
     Work-in-process                                 51,587         51,259
     Raw materials                                  102,228        103,561
     ---------------------------------------------------------------------
                                                   $281,107       $269,677
     =====================================================================

     7.  Intangible Assets

          Intangible assets include the following:
     ---------------------------------------------------------------------
                                                December 31,   December 31,
                                                       1996           1995
     ---------------------------------------------------------------------
     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        105,764
     ---------------------------------------------------------------------
                                                     396,001       408,655
     Less accumulated amortization                    51,900        38,348 
     ---------------------------------------------------------------------
                                                    $344,101      $370,307
     =====================================================================

     8.  Long-Term Debt

          Long-term debt consists of the following:
     ---------------------------------------------------------------------
                                                December 31,   December 31,
                                                       1996           1995
     ---------------------------------------------------------------------
     Secured credit agreement                      $359,000       $521,000
     Receivables securitization facility            200,000        185,000
     Other                                           13,600         17,679
     ---------------------------------------------------------------------
                                                    572,600        723,679
     Less current maturities                              -         18,639 
     ---------------------------------------------------------------------
                                                   $572,600       $705,040 
     =====================================================================<PAGE>

          The following discussion summarizes certain provisions of the
     long-term debt.

     Secured Credit Agreement

          On September 6, 1996, the Company refinanced its Secured Credit
     Agreement.  The new Secured Credit Agreement is a five year reducing
     revolving credit facility with an initial commitment totaling
     $475,000.  The Secured Credit Agreement allows for issuance of letters
     of credit and cash borrowings.  Letter of credit outstandings are
     limited to no more than $60,000, with cash borrowings limited only by
     the facility's maximum availability less letters of credit
     outstanding.

          Under the letter of credit facility, a fee of 0.875% per annum
     (subject to reduction based upon the Company achieving certain
     leverage ratios) is assessed for the account of the lenders ratably. 
     A further fee of 0.125% is assessed on stand-by 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 Secured Credit Agreement 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 the Eurodollar
     rate is subject to adjustment based upon achieving certain leverage
     ratios.  At December 31, 1996, all loans outstanding under the Secured
     Credit Agreement were based on the Eurodollar rate.

          At December 31, 1996, there were $359,000 of cash borrowings and
     $28,767 in letters of credit outstanding under the Secured Credit
     Agreement, leaving an excess of $87,233 available under the facility.

          The common stock of the Company's principal subsidiaries,
     substantially all of the Company's cash, working capital (other than
     trade receivables) and property, plant and equipment, have been
     pledged or mortgaged as security for the Secured Credit Agreement. 
     The Secured Credit Agreement contains a number of restrictive
     covenants and events of default, including covenants limiting capital
     expenditures and incurrence of debt, and requires the Company to
     achieve certain financial ratios, some of which become more
     restrictive over time.

          The Secured Credit Agreement has no mandatory principal payments;
     however, the commitment is reduced to $400,000 on September 30, 1999
     and $300,000 on September 29, 2000, with the remaining commitment
     maturing on September 15, 2001.  In addition, the facility requires
     principal payments from a portion of the net proceeds realized from
     (i) the sale, conveyance or other disposition of collateral securing
     the debt, or (ii) the sale by the Company for its own account of
     additional subordinated debt and/or shares of its preferred and/or
     common stock.<PAGE>


     Receivables Securitization Facility

          The Receivables Securitization Facility is an obligation of the
     Company which matures on December 29, 2000 and is secured by
     substantially all of the Company's trade receivables.  The facility
     operates through use of a special purpose subsidiary (Interco
     Receivables Corp.) which "buys" trade receivables from the operating
     companies and "sells" interests in same to a third party financial
     institution, which uses the interests as collateral for borrowings in
     the commercial paper market to fund the purchases.  The Company
     accounts for this facility as long-term debt.

          The Company pays a commercial paper index rate on all funds
     received (outstanding) on the facility.  In addition, a program fee of
     0.55% per annum on the entire $225,000 facility is payable on a
     monthly basis.  The balance outstanding at December 31, 1996 was
     $200,000.  The Company may increase or decrease its use of the
     facility on a monthly basis subject to the availability of sufficient
     trade receivables and the facility's maximum amount ($225,000).  As of
     December 31, 1996, the Company had $9,989 in excess availability under
     the facility.

     Other

          Other long-term debt consists of various industrial revenue bonds
     with interest rates ranging from approximately 4.0% to 9.0%. 
     Mandatory principal payments are required through 2004.

     Interest Rate Swap Agreements

          In February 1996, the Company entered into interest rate swap
     agreements with two financial institutions to reduce the impact of
     changes in interest rates on its floating rate long-term debt.  The
     two agreements, which mature in three years, have a total notional
     principal amount of $300,000.  The swap agreements effectively convert
     a portion of the Company's floating rate long-term debt to a fixed
     rate.  The Company pays the counterparties a fixed rate of 5.14% per
     annum and receives payments based upon the floating three month
     Eurodollar rate.  The Company is exposed to credit loss in the event
     of nonperformance by the counter-parties; however, the Company does
     not anticipate nonperformance by the counter-parties. 

     Other Information

          Maturities of long-term debt are $0, $0, $0, $288,567 and
     $272,033 for years 1997 through 2001, respectively.<PAGE>


      9.  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, 1996, 61,432,181
     shares of common stock were issued and outstanding.   It is not
     presently anticipated that dividends will be paid on common stock in
     the foreseeable future and certain of the debt instruments to which
     the Company is a party restrict the payment of dividends.

          Shares of common stock were reserved for the following purposes
     at December 31, 1996:

     ---------------------------------------------------------------------
                                                                    NUMBER
                                                                 OF SHARES
     ---------------------------------------------------------------------
     Common stock options:
       Granted                                                   3,859,476
       Available for grant                                         184,724
     Common stock warrants                                       2,042,631
     ---------------------------------------------------------------------
                                                                 6,086,831
     =====================================================================


          Under the Company's 1992 Stock Option Plan, certain key employees
     may be granted nonqualified options, incentive options or combinations
     thereof.  Nonqualified and incentive options may be granted to expire
     up to ten years after the date of grant.  Options granted become
     exercisable at varying dates depending upon the achievement of certain
     performance targets and/or the passage of certain time periods.

          In October 1995, the Financial Accounting Standards Board issued
     SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS No.
     123").  Under SFAS No. 123, companies can either measure the
     compensation cost of equity instruments issued under employee
     compensation plans using a fair value based method, or can continue to
     recognize compensation cost under the provisions of Accounting
     Principles Board Opinion No. 25 ("Opinion No. 25") with pro forma
     disclosures of net income and earnings per share as if the fair value
     method has been applied.  The Company adopted SFAS No. 123 as of
     January 1, 1996 and has elected to, as permitted under the statement,
     continue recognition of compensation costs under the provisions of
     Opinion No. 25 with appropriate disclosure, if material.  The effect
     on net earnings for the years ended December 31, 1996 and 1995 is not
     material and, accordingly, no disclosure has been made.  Further,
     based on current and anticipated use of stock options for the
     foreseeable future, it is not envisioned the impact of the
     pronouncement would be material in subsequent periods.

          The 1992 Stock Option Plan authorizes grants of options to
     purchase common shares at less than fair market value on the date of
     grant.  During 1996, option grants totaling 217,978 common shares were<PAGE>





     made by the Company at less than market value.  These options were
     issued to Thomasville employees as compensation for forfeited deferred
     compensation plans due to the acquisition; therefore, the cost of
     issuing the options at less than market value was included in
     determining the excess of cost over net assets acquired.

          Changes in options granted and outstanding are summarized as
     follows:

<TABLE>
<CAPTION>
   <S>                       <C>         <C>       <C>         <C>       <C>        <C>

                                       Year Ended           Year Ended           Year Ended
                                December 31, 1996    December 31, 1995    December 31, 1994
                                -----------------    -----------------    -----------------
                                          Average              Average              Average
                               Shares       Price    Shares      Price    Shares      Price
                               ------     -------    ------    -------    ------    -------
   Beginning of period       2,498,000   $  4.75   2,643,000   $  4.64   2,915,000  $  7.39 
   Granted                   1,620,926      9.14     125,000      6.42     917,000     7.85
   Exercised                   (85,050)     3.99     (43,000)     3.38     (71,250)    7.00
   Cancelled                  (174,400)     4.29    (227,000)     4.68  (1,117,750)    7.82
                             ---------   -------   ---------   -------  ----------  -------
   End of period             3,859,476   $  6.63   2,498,000   $  4.75   2,643,000  $  4.64
                             =========   =======   =========   =======  ==========  =======
   Exercisable at 
     end of period           1,473,600             1,346,750               954,750
                             =========             =========             =========
</TABLE>

           As a result of the November 17, 1994 distribution of the common
     stock of The Florsheim Shoe Company and Converse Inc. to the Company's
     shareholders, options granted to the employees of those operating
     companies were cancelled.  In addition, the exercise prices of the
     remaining options were adjusted to reflect the distribution in
     accordance with the antidilution provisions of the 1992 Stock Option
     Plan.

          As of December 31, 1996, the Company had outstanding
     approximately 2.0 million warrants to purchase common stock.  Each
     warrant entitles the holder thereof to purchase one share of common
     stock at $7.13 per share (as adjusted for the November 17, 1994
     distribution to shareholders of the Company's former footwear
     segment).  The warrants, which expire on August 3, 1999, include a
     five year call protection which expires on August 3, 1997.  The
     warrants trade on the over-the-counter market.

     10. Income Taxes

          Income tax expense was comprised of the following:

     ----------------------------------------------------------------------
                                               Year Ended December 31,     
                                            1996         1995         1994
     ----------------------------------------------------------------------
     Current:
        Federal                          $40,870       $20,499     $10,095
        State and local                    4,014         2,527       2,909
     ----------------------------------------------------------------------
                                          44,884        23,026      13,004
     Deferred                            (10,814)         (211)      7,904
     ----------------------------------------------------------------------
                                         $34,070       $22,815     $20,908
     ======================================================================

         The following table reconciles the differences between the Federal
     corporate statutory rate and the Company's effective income tax rate:

     ---------------------------------------------------------------------  
                                               Year Ended December 31,      
                                            1996         1995        1994
     ---------------------------------------------------------------------
     Federal corporate statutory rate        35.0%        35.0%       35.0%
     State and local income taxes,
       net of Federal tax benefit             2.3          2.6         2.9
     Amortization of excess 
       reorganization value                   2.9          4.5         5.2 
     Other                                   (1.6)        (2.1)       (0.3)
     ---------------------------------------------------------------------
     Effective income tax rate               38.6%        40.0%       42.8%
     =====================================================================

         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,
                                                       1996           1995
     ---------------------------------------------------------------------
     Deferred tax assets:
       Employee postretirement benefits
         other than pensions                       $  3,318       $ 10,954
       Expense accruals                              14,251          9,267
       Valuation reserves                             6,514          5,147
       Inventory costs capitalized                    2,550          1,785
       Other                                          1,063            919
     ---------------------------------------------------------------------
         Total gross deferred tax assets             27,696         28,072
       Valuation allowance                              -              -  
     ---------------------------------------------------------------------
         Total net deferred tax assets               27,696         28,072

     Deferred tax liabilities:
       Fair value adjustments                       (77,645)       (84,263)
       Employee pension plans                          (697)        (1,990)
       Depreciation                                  (7,158)        (9,029)
       Other                                         (9,784)        (8,350)
     ---------------------------------------------------------------------
        Total deferred tax liabilities              (95,284)      (103,632)
     ---------------------------------------------------------------------
        Net deferred tax liabilities               $(67,588)      $(75,560)
     =====================================================================<PAGE>


          The net deferred tax liabilities are included in the consolidated
     balance sheet as follows:

     ---------------------------------------------------------------------  
                                                December 31,   December 31,
                                                       1996           1995
     ---------------------------------------------------------------------
     Prepaid expenses and other current assets     $ 19,783       $ 14,328
     Other long-term liabilities                    (87,371)       (89,888)
     ---------------------------------------------------------------------
                                                   $(67,588)      $(75,560)
     =====================================================================

     11.  Employee Benefits

          The Company sponsors or contributes to retirement plans covering
     substantially all employees.  The total cost of all plans for 1996,
     1995 and 1994 was $9,450, $7,070 and $6,303, 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,
                                                       1996           1995
     ---------------------------------------------------------------------
     Actuarial present value of benefit obligations:
           Vested benefit obligation               $230,456       $217,879
                                                   =======================
           Accumulated benefit obligation          $237,512       $222,256
                                                   =======================

           Projected benefit obligation            $262,667       $254,815
     Plan assets at fair value                      279,054        252,810
     ---------------------------------------------------------------------
     Plan assets in excess of (less than) projected
       benefit obligation                            16,387         (2,005)
     Unrecognized net (gain)/loss                   (13,975)         5,211
     Unrecognized prior service cost                  1,021          1,267
     ---------------------------------------------------------------------
     Prepaid pension cost                          $  3,433       $  4,473
     =====================================================================<PAGE>


          Net periodic pension cost for 1996, 1995 and 1994 includes the
     following components:

     ---------------------------------------------------------------------
                                              Year Ended December 31,
                                           1996         1995         1994
     ---------------------------------------------------------------------
     Service cost-benefits earned
           during the period            $  6,792     $  3,544     $  4,758 
     Interest cost on the projected
           benefit obligation             18,102       17,005       13,682 
     Actual return on plan assets        (41,006)     (49,272)        (159)
     Net amortization and deferral        20,366       31,566      (16,297)
     ---------------------------------------------------------------------
     Net periodic pension cost         $   4,254     $  2,843     $  1,984
     =====================================================================

          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 8.5% in
     1996, 8.5% in 1995 and 8.0% - 9.5% in 1994.  Measurement of the
     projected benefit obligation was based upon a weighted average
     discount rate of 7.25%, 7.25% and 8.0% and a long-term rate of
     compensation increase of 4.5%, 4.5% and 4.5% for 1996, 1995 and 1994,
     respectively. 

     Other Retirement Plans and Benefits

          In addition to defined benefit plans, the Company makes
     contributions to a defined contribution plan and sponsors employee
     savings plans.  The cost of these plans is included in the total cost
     for all plans reflected above.

          In 1996, Thomasville discontinued postretirement medical benefits
     for future retirees.  The accrued postretirement benefit obligation as
     of December 31, 1995 of $31,906 was primarily due to the acquisition
     of Thomasville; therefore, the elimination of the benefit was recorded
     as an adjustment to excess of cost over net assets acquired.

     12. Lease Commitments

          Certain of the Company's real properties and equipment are
     operated under lease agreements expiring at various dates through the
     year 2005.  Leases covering equipment generally require, in addition
     to stated minimums, contingent rentals based on usage.  Generally, the
     leases provide for renewal for various periods at stipulated rates.<PAGE>





     Rental expense under operating leases was as follows:

     ---------------------------------------------------------------------
                                                Year Ended December 31,
                                            1996         1995         1994
     ---------------------------------------------------------------------
     Basic rentals                       $13,470      $11,516      $11,553
     Contingent rentals                    1,364          779          385
     ---------------------------------------------------------------------
                                          14,834       12,295       11,938
     Less: sublease rentals                   76           54           54
     ---------------------------------------------------------------------
                                         $14,758      $12,241      $11,884
     =====================================================================

          Future minimum lease payments under operating leases, reduced by
     minimum rentals from subleases of $491 at December 31, 1996, aggregate
     $39,691.  Annual minimum payments under operating leases are $12,370,
     $10,351, $7,817, $5,087 and $2,327 for 1997 through 2001,
     respectively.

     13. 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 the Secured Credit Agreement and
     Receivables Securitization Facility are also considered to be carried
     on the financial statements at their estimated fair values because
     they were entered into recently and both accrue interest at rates
     which generally fluctuate with interest rate trends.

          Amounts outstanding under other long-term debt are considered
     special purpose financing as an incentive to acquire specific real
     estate.  Accordingly, the Company believes the carrying amounts
     approximate fair value given the circumstances under which such
     financings were acquired.

          The fair value of the interest rate swap agreements at December
     31, 1996 is approximately $5.0 million.  The fair value of the
     interest rate swap agreements is based upon market quotes from the
     counterparties.

     14. Gain on Insurance Settlement

          On November 20, 1994, an explosion and fire destroyed a
     particleboard plant owned and operated by the Company.  During 1995,
     the Company rebuilt the plant with proceeds received from the
     insurance settlement.  As a result thereof, a gain on insurance
     settlement, totaling $7,882, was recorded during the fourth quarter of
     1995.  The gain includes all costs associated with the claim with no
     further expenses or liability anticipated.<PAGE>


     15. Litigation

          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 manage-ment, 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.

     16. Quarterly Financial Information (Unaudited)

          Following is a summary of unaudited quarterly information:

<TABLE>
<CAPTION>
         <C>                   <C>            <C>           <C>            <C>

  -------------------------------------------------------------------------------
                                 Fourth         Third        Second         First
                                Quarter       Quarter       Quarter       Quarter
  -------------------------------------------------------------------------------
   Year ended December 31, 1996:
        Net sales              $434,185      $417,921    $  420,742    $  423,947
        Gross profit            110,627       107,067       108,446       105,333
        Net earnings:
         Continuing operations   17,429        14,325        11,621        10,847
         Extraordinary item         -          (7,417)          -             -  
         Total                 $ 17,429      $  6,908    $   11,621    $   10,847

        Net earnings per common share -
         primary:
         Continuing operations $   0.27      $   0.22    $     0.18    $     0.19
         Extraordinary item          -          (0.11)           -             - 
         Total                 $   0.27      $   0.11    $     0.18    $     0.19

        Net earnings per common share -
         fully diluted:
         Continuing operations $   0.27      $   0.22    $     0.18    $     0.19
         Extraordinary item          -          (0.11)           -             - 
         Total                 $   0.27      $   0.11    $     0.18    $     0.19

       Common stock price range
         (High-Low)            $147/8-12      $145/8-10    $121/8-91/8     $101/8-83/8
    ===============================================================================
  Year ended December 31, 1995:
        Net sales              $279,023      $258,626    $  250,336    $  285,904
        Gross profit             76,932        70,557        67,399        76,349
        Net earnings:
         Continuing operations   14,797         6,196         5,487         7,743
         Extraordinary item      (5,815)            -             -             -
         Total                 $  8,982      $  6,196    $    5,487    $    7,743

        Net earnings per common share -
         primary:
         Continuing operations $   0.29      $   0.12    $     0.11    $     0.15
         Extraordinary item       (0.11)            -             -             -
         Total                 $   0.18      $   0.12    $     0.11    $     0.15
      Net earnings per common share -
        fully diluted:
        Continuing operations  $   0.27      $   0.12    $     0.11    $     0.15
        Extraordinary item        (0.11)            -             -             -
        Total                  $   0.16      $   0.12    $     0.11    $     0.15

       Common stock price range
         (High-Low)            $  91/8-7     $81/8-53/4   $ 67/8-53/4  $ 71/8-61/8
   ===============================================================================
</TABLE>
          The Company has not paid cash dividends on its common stock
     during the two years ended December 31, 1996.  The closing market
     price of the Company's common stock on December 31, 1996 was $14.00
     per share.

     Item 9.  Changes in and Disagreements With Accountants on Accounting
     --------------------------------------------------------------------
     and Financial Disclosure
     ------------------------

          Not applicable.<PAGE>



                                  PART III
                                  --------


     Item 10. Directors and Executive Officers of the Registrant
     -----------------------------------------------------------

          The section entitled "Nominees" of the Company's Definitive Proxy
     Statement for the Annual Meeting of Stockholders on April 29, 1997 is
     incorporated herein by reference.

     Executive Officers of the Registrant
<TABLE>
<CAPTION>
  <S>     <C>           <C>    <S>                            <C>            <C>

                                                             Current    Appointed
          Name           Age   Position                    Positions   or Elected
          ----           ---   --------                    ---------   ----------
  *Wilbert G. Holliman   59    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

  *Richard B. Loynd      69    Chairman of the Board of the
                                Former Subsidiary - Converse Inc.           1982
                               Vice-President                               1987
                               Director                         X           1987
                               President                                    1989
                               Chief Operating Officer                      1989
                               Chief Executive Officer                      1989
                               Chairman of the Board            X           1990

  John T. Foy           49     President and Chief Executive
                                Officer of the Subsidiary -
                                Action Industries, Inc.         X           1996
   
  Brent B. Kincaid      65     President and Chief Executive
                                Officer of the Subsidiary -
                                Broyhill Furniture Industries,
                                Inc.                            X           1992

  Frederick B. Starr    64     President and Chief Executive
                                Officer of the Subsidiary -
                                Thomasville Furniture 
                                Industries,Inc.                 X           1982

  K. Scott Tyler, Jr.   57     President of the Subsidiary -
                                The Lane Company, Incorporated  X           1989
                               Chief Executive Officer of the
                                Subsidiary - The Lane Company,
                                Incorporated                    X           1991

  David P. Howard       46     Controller                                   1990
                               Vice-President                   X           1991
                               Chief Financial Officer          X           1994
                               Treasurer                        X           1996

  Lynn Chipperfield     45     General Counsel                  X           1993
                               Vice-President and Secretary     X           1996 

  Steven W. Alstadt     42     Controller                       X           1994
                               Chief Accounting Officer         X           1994


  The following officer retired on January 30, 1996

  Duane A. Patterson    64     Secretary                                    1973
                               Director                                     1991
                               Vice-President                               1992

  --------------------------------------
  * Member of the Executive Committee
</TABLE>

     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 29, 1997,
     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 29, 1997, is incorporated herein by reference.<PAGE>





     Item 13.  Certain Relationships and Related Transactions
     --------------------------------------------------------

          The section entitled "Certain Business Relationships" of the
     Company's Definitive Proxy Statement for the Annual Meeting of
     Stockholders on April 29, 1997, is incorporated herein by reference.<PAGE>





                                    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, 1996 and 1995.

               Consolidated statements of operations for each of the years
               in the three-year period ended December 31, 1996.

               Consolidated statement of cash flows for each of the years
               in the  three-year period ended December 31, 1996.

               Consolidated statement of shareholders' equity for each of
               the years in the three-year period ended December 31, 1996.

               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 April
                      23, 1996. (Incorporated by reference to Exhibit 3(b)
                      to Furniture Brands International, Inc.'s Quarterly
                      Report on Form 10-Q for the quarter ended September
                      30, 1996.)

                4(a)  Credit Agreement, dated as of November 17, 1994, as
                      amended and  restated as of December 29, 1995, and
                      further amended and restated as of September 6, 1996,
                      among the Company, Broyhill Furniture Industries,
                      Inc., The Lane Company, Incorporated, Thomasville
                      Furniture Industries, Inc., Various Banks, Credit
                      Lyonnais New York Branch, as Documentation Agent,
                      Nationsbank, N.A., as Syndication Agent and Bankers
                      Trust Company, as Administration Agent. (Incorporated
                      by reference to Exhibit 4(a) to Furniture Brands
                      International, Inc.'s Quarterly Report on Form 10-Q
                      for the quarter ended September 30, 1996.)

                4(b)  Purchase and Contribution Agreement, dated as of
                      November 15, 1994, as amended and restated as of
                      December 29, 1995 among The Lane Company,
                      Incorporated, Action Industries, Inc., Broyhill
                      Furniture Industries, Inc. and Thomasville Furniture
                      Industries as Sellers and Interco Receivables Corp.
                      as Purchaser. (Incorporated by reference to Exhibit
                      4(b) to Furniture Brands International, Inc.'s Annual
                      Report on Form 10-K for the period ended December 31,
                      1995.)

                4(c)  Amendment No. 1, dated as of June 27, 1996, to the
                      Purchase and Contribution Agreement, dated as of
                      November 15, 1994, as amended and restated as of
                      December 29, 1995, among The Lane Company,
                      Incorporated, Action Industries, Inc., Broyhill
                      Furniture Industries, Inc. and Thomasville Furniture
                      Industries, Inc. as Sellers and Interco Receivables
                      Corp. as Purchaser.  (Incorporated by reference to
                      Exhibit 4(b) to Furniture Brands International Inc.'s
                      Quarterly Report on Form 10-Q for the quarter ended
                      September 30, 1996.)

                4(d)  Amendment No. 2, dated as of September 6, 1996, to
                      the Purchase and Contribution Agreement, dated as of
                      November 15, 1994, as amended and restated as of
                      December 29, 1995, and further amended as of June 27,
                      1996, among The Lane Company, Incorporated, Action
                      Industries, Inc., Broyhill Furniture Industries, Inc.
                      and Thomasville Furniture Industries, Inc. as Sellers
                      and Interco Receivables Corp. as Purchaser. 
                      (Incorporated by reference to Exhibit 4(c) to
                      Furniture Brands International Inc.'s Quarterly
                      Report on Form 10-Q for the quarter ended September
                      30, 1996.)

                4(e)  Receivables Purchase Agreement, dated as of November
                      15, 1994, as amended and restated as of December 29,
                      1995, among Interco Receivables Corp. as the Seller
                      and Atlantic Asset Securitization Corp. as an
                      Investor and Credit Lyonnais New York Branch as  the
                      Agent. (Incorporated by reference to Exhibit 99(b) to
                      Furniture Brands International, Inc.'s Current Report
                      on Form 8-K, dated January 12, 1996.)

                 4(f)  Amendment No. 1, dated as of June 27, 1996, to the
                       Receivables Purchase Agreement, dated as of November
                       15, 1994, as amended and restated as of December 29,
                       1995, among Interco Receivables Corp. as Seller,
                       Atlantic Asset Securitization Corp., as Issuer, and
                       Credit Lyonnais New York Branch, as Agent for the
                       Investors.  (Incorporated by reference to Exhibit
                       4(d) to Furniture Brands International Inc.'s
                       Quarterly Report on Form 10-Q for the quarter ended
                       September 30, 1996.)

                 4(g)  Amendment No. 2, dated as of September 6, 1996, to
                       the Receivables Purchase Agreement, dated as of
                       November 15, 1994, as amended and restated as of
                       December 29, 1995, and further amended as of June
                       27, 1996, among Interco Receivables Corp. as Seller,
                       Atlantic Asset Securitization Corp. as Issuer, and
                       Credit Lyonnais New York Branch, as Agent for the
                       Investors.  (Incorporated by reference to Exhibit
                       4(e) to Furniture Brands International Inc.'s
                       Quarterly Report on Form 10-Q for the quarter ended
                       September 30, 1996.)

                 4(h)  Warrant Agreement, dated as of August 3, 1992,
                       between the Company and Society National Bank, as
                       Warrant Agent. (Incorporated by reference to Exhibit
                       4.5 to Furniture Brands International, Inc.'s
                       Current Report on Form 8-K, dated August 18, 1992.)

                 4(i)  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 4(c) to Furniture Brands International,
                       Inc.'s Post-Effective Amendment No. 1 to S-3
                       Registration Statement, No. 33-65714.)

                10(b)  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.)<PAGE>





                10(c)  Consulting Agreement, dated as of September 23,
                       1992, between the Company and Apollo Advisors, L.P.
                       as amended on February 20,  1995.  (Incorporated by
                       reference to Exhibit 10(c) to Furniture Brands
                       International, Inc.'s Annual Report on Form 10-K for
                       the year ended December 31, 1995.)

                10(d)  Registration Rights Agreement, dated as of August 3,
                       1992, between the Company and Apollo Interco
                       Partners, L.P. (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, 1992.)

                10(e)  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(f)  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(g)  Furniture Brands International, Inc. Executive
                       Incentive Plan.

                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(j)  Thomasville Furniture Industries, Inc. Executive
                       Incentive Plan

                10(k)  Employment Agreement, dated as of August 1, 1996,
                       between Action Industries, Inc. and Wilbert G.
                       Holliman.  (Incorporated by reference to Exhibit
                       10(a) to Furniture Brands International Inc.'s
                       Quarterly Report on Form 10-Q for the quarter ended
                       September 30, 1996.)

                10(l)  Written description of employment agreement between
                       the Company and Wilbert G. Holliman.  (Incorporated
                       by reference to Exhibit 10(b) 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 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(n)  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(o)  Employment Agreement, dated as of August 1, 1996,
                       between Broyhill Furniture Industries, Inc. and
                       Brent B. Kincaid.  (Incorporated by reference to
                       Exhibit 10(e) to Furniture Brands International
                       Inc.'s Quarterly Report on Form 10-Q for the quarter
                       ended September 30, 1996.)
      
                10(p)  Employment Agreement, dated as of August 1, 1996,
                       between Thomasville Furniture Industries, Inc. and
                       Frederick B. Starr.  (Incorporated by reference to
                       Exhibit 10(f) to Furniture Brands International
                       Inc.'s Quarterly Report on Form 10-Q for the quarter
                       ended September 30, 1996.)

                10(q)  Employment Agreement, dated as of August 1, 1996,
                       between The Lane Company, Incorporated and K. Scott
                       Tyler, Jr.  (Incorporated by reference to Exhibit
                       10(g) to Furniture Brands International Inc.'s
                       Quarterly Report on Form 10-Q for the quarter ended
                       September 30, 1996.)

                11     Statement regarding computation of per share
                       earnings.    

                21     List of Subsidiaries of the Company.
        
                23     Consent of KPMG Peat Marwick LLP

                27     Financial Data Schedule

                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)  Distribution and Services Agreement, dated November
                       17, 1994, among the Company, The Florsheim Shoe
                       Company and certain of its subsidiaries.
                       (Incorporated by reference to Exhibit 99(c) to
                       Furniture Brands International, Inc.'s Annual Report
                       on Form 8-K, dated December 2, 1994.)

                99(d)  INTERCO/Florsheim Tax Sharing Agreement, dated
                       November 17, 1994, among the Company, The Florsheim
                       Shoe Company and certain of its subsidiaries.
                       (Incorporated by reference to Exhibit 99(d) to
                       Furniture Brands International, Inc.'s Annual Report
                       on Form 8-K, dated December 2, 1994.)

                99(e)  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 October 18, 1996 containing the
               Company's Press Release of the same date reporting the
               Company's third quarter results.

               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.<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, 1996 and 1995   18

       Consolidated Statements of Operations for each of the years 
        in the three-year period ended December 31, 1996              19

       Consolidated Statement of Cash Flows for each of the years 
        in the three-year period ended December 31, 1996              20

       Consolidated Statement of Shareholders' Equity for each of 
        the years in the three-year period ended December 31, 1996    21

       Notes to Consolidated Financial Statements                     22

       Financial Statement Schedule                                   39

       Independent Auditors' Report                                   41

     Consolidated Financial Statement Schedules:
                                                         Schedule
                                                         --------
       Valuation and qualifying accounts                    II        40<PAGE>



<TABLE>
<CAPTION>


                                                                                        SCHEDULE II
     <S>                             <C>            <C>          <C>       <C>   <C>      <C>    <C>
                                                                                        -----------

                                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        Acquired        End of
  Description                       of Period       Expenses       Reserves       Company         Period
  -----------                       ----------     ----------     ----------     --------       ----------
  Year Ended December 31, 1996
  ----------------------------
    Allowances deducted from
    receivables on balance sheet:
     Allowance for doubtful accounts $17,961        $ 6,179      $(10,436) (a)   $ 3,350  (d)    $17,054
     Allowance for cash discounts/
       chargebacks                     2,763            689        (1,382) (c)       -             2,070
                                     -------        -------      ---------       -------         -------
                                     $20,724        $ 6,868      $(11,818)       $ 3,350         $19,124
                                     =======        =======      =========       =======         =======

  Year Ended December 31, 1995
  ----------------------------
    Allowances deducted from
    receivables on balance sheet:
     Allowance for doubtful accounts $ 4,814        $ 1,672      $ (1,475) (a)  $12,950          $17,961
     Allowance for cash discounts/
       chargebacks                       248            271          (278) (b)    2,522            2,763
                                     -------        -------      --------       -------          -------
                                     $ 5,062        $ 1,943      $ (1,753)      $15,472          $20,724
                                     =======        =======      ========       =======          =======
  Year Ended December 31, 1994
  ----------------------------
    Allowances deducted from
    receivables on balance sheet:
     Allowance for doubtful accounts $ 3,847        $ 3,372      $ (2,405) (a)  $   -            $ 4,814
     Allowance for cash discounts        213            306          (271) (b)      -                248
                                     -------        -------      --------       -------          -------
                                     $ 4,060        $ 3,678      $ (2,676)      $   -            $ 5,062
                                     =======        =======      ========       =======          =======


  (a)   Uncollectible accounts written off, net of recoveries.
  (b)   Cash discounts taken by customers.
  (c)   Cash discounts taken by customers and claims allowed to customers.
  (d)   Subsequent purchase accounting adjustment for acquired company.

  See accompanying independent auditors' report.
</TABLE>
<PAGE>



                            INDEPENDENT AUDITORS' REPORT


     The Board of Directors and Shareholders
     Furniture Brands International, Inc.:


          We have audited the consolidated financial statements of
     Furniture Brands International, Inc. and subsidiaries as listed in the
     accompanying index.  In connection with our audits of the consolidated
     financial statements, we also have audited the financial statement
     schedule as listed in the accompany index.  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 generally accepted
     auditing standards.  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, 1996 and 1995, and the results of their operations and
     their cash flows for each of the years in the three-year period ended
     December 31, 1996, in conformity with generally accepted accounting
     principles.  Also in our opinion, the related financial statement
     schedule, when considered in relation to the basic consolidated
     financial statements taken as a whole, presents fairly, in all
     material respects, the information set forth therein.

                                           KPMG Peat Marwick LLP



     St. Louis, Missouri
     January 28, 1997<PAGE>






                                  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
                                        President and Chief 
                                          Executive Officer

     Date:  March 25, 1997


          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 25,
     1997.


            Signature                           Title
            ---------                           -----

      Wilbert G. Holliman                President and Director
     -----------------------             (Principal Executive Office)
     (Wilbert G. Holliman)

      Donald E. Lasater                   Director
     -----------------------
     (Donald E. Lasater)

      Lee M. Liberman                     Director
     -----------------------
     (Lee M. Liberman)

      Leon D. Black                       Director
     -----------------------
     (Leon D. Black)

      Richard B. Loynd                    Director
     -----------------------
     (Richard B. Loynd)

      Joshua J. Harris                    Director
     -----------------------
     (Joshua J. Harris)<PAGE>

      Michael S. Gross                    Director
     -----------------------
     (Michael S. Gross)

      John J. Hannan                     Director
     -----------------------
     (John J. Hannan)

      Bruce A. Karsh                     Director
     -----------------------
     (Bruce A. Karsh)

      John H. Kissick                    Director
     -----------------------
     (John H. Kissick)

      Marc J. Rowan                      Director
     -----------------------
     (Marc J. Rowan)

      John J. Ryan, III                  Director
     -----------------------
     (John J. Ryan, III)

      Michael D. Weiner                 Director
     -----------------------
     (Michael D. Weiner)

      David P. Howard                   Vice President and Treasurer
     -----------------------            (Principal Financial Officer)
     (David P. Howard)

      Steven W. Alstadt                 Controller
     -----------------------            (Principal Accounting Officer)
     (Steven W. Alstadt)<PAGE>