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, 1997 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<PAGE>





     reports required to be filed by Section 13 or 15(d) of the Securities
     Exchange Act of 1934 during the preceding 12 months, and (2) has been
     subject to such filing requirements for the past 90 days.  
                                                 Yes    x       No         
                                                    ----------     -------


          Indicate by check mark if disclosure of delinquent filers
     pursuant to Item 405 of Regulation S-K is not contained herein, and
     will not be contained, to the best of registrant's knowledge, in
     definitive proxy or information statements incorporated by reference
     in Part III of this Form 10-K or any amendment to this Form 10-K [X]

          The aggregate market value of the voting stock held by
     non-affiliates of the registrant as of February 28, 1998, was
     approximately $1,423,012,780.




          Indicate the number of shares outstanding of each of the
     registrant's classes of common stock, as of the latest practicable
     date. 

                        52,127,055 shares as of February 28, 1998

                          DOCUMENTS INCORPORATED BY REFERENCE

     Portions of Definitive Proxy Statement for Annual Meeting
          of Stockholders on May 6, 1998 ...................      Part III<PAGE>





                                    PART I

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

     (a)  General Development of Business

     On February 10, 1998, Haverty Furniture Companies, Inc. and Furniture
     Brands International, Inc. jointly announced a strategic alliance
     whereby Havertys will allocate, upon full implementation of the
     program, up to one-half of its retail floor space in all of its stores
     to the prominent display of product manufactured by the Company.

     (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.; Lane Furniture Industries, Inc.; 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.

                                                                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

<PAGE>


     BROYHILL FURNITURE INDUSTRIES
      
     Broyhill produces collections of medium price bedroom, dining room,
     upholstered and occasional furniture aimed at middle-income consumers. 
     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, contemporary and
     lifestyle designs.
      
     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. 
      
     LANE FURNITURE INDUSTRIES
      
     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 manufactures and markets reclining chairs and motion
     furniture in the "good," "better" and "best" price categories under
     the Lane brand name. Motion furniture consists of sofas and loveseats
     with recliner-style moving parts and comfort features, wall saver
     recliners, pad-over chaise recliners, hi-leg recliners, sleep sofas
     and motion sectionals. Royal Development Company designs and
     manufactures the mechanisms used in Action Industries' reclining
     furniture products. 
      
     The Lane division 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 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 furniture sells in the "premium" price category and is
     distributed to high-end furniture stores and interior designers.

     The Venture division manufactures and markets moderately priced 
     wicker, rattan and bamboo upholstered furniture, tables, occasional
     wood pieces and other home furnishing accessories.  Venture
     manufactures a line of outdoor and patio furniture featuring fast
     drying upholstered cushions under the names WeatherMaster and
     Weathercraft, which have 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 and wood under one brand name that
     targets the "best" and "premium" price categories. Upholstery is
     primarily marketed in three major styles: Traditional, American
     Traditional/Country and Casual/Lifestyle Contemporary. Upholstery
     style is determined by both frame style and fabric or leather
     selection. Thomasville's frame assortment allows the consumer to
     select from a wide variety of different styles within the general
     style categories, and as much as 45% of the Thomasville fabric and
     leather offering changes in a 12 month period, insuring that the
     latest colors and textures are available.

     Wood furniture is primarily marketed in four major styles: American
     Traditional/Country, 18th Century, European Traditional and Casual
     Contemporary.  To appeal to a younger generation, the Company has
     recently introduced products which feature smaller scale and lighter
     wood than Thomasville's traditional wood furniture.
      
     Thomasville's Founders division offers assembled bedroom sets,
     bookcases and home entertainment centers as well as RTA (ready-to-
     assemble) furniture such as home entertainment centers, bookcases,
     bedroom and kitchen/utility furniture and computer desks. 
     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<PAGE>


     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
     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
     Havertys, 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 97 free-standing stores, 1,089 galleries and 443 furniture
     centers.

     Haverty Furniture Companies, Inc. and the Company recently announced a
     strategic alliance whereby Havertys will allocate, upon full
     implementation of the program, up to one-half of its retail floor
     space in all of its stores to the prominent display of product
     manufactured by the Company.  This alliance advances the Company's
     strategy of expanding distribution and dedicated display space.

     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.<PAGE>





     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 348
     domestic and international participating dealer locations.  Each
     dealer in the Broyhill Showcase Gallery Program owns the gallery and
     the Broyhill furniture inventory. The program incorporates a core
     merchandise program, advertising material support, in-store
     merchandising events and educational opportunities for the retail
     store sales and management personnel. The average Broyhill Showcase
     Gallery consists of 7,500 square feet of dedicated display space. 
     Furniture is displayed in complete and fully accessorized room
     settings instead of as individual pieces.
      
     For the retailer that is currently not a participant in the gallery
     program, Broyhill offers the Independent Dealer Program. This concept,
     initiated in 1987, is designed to strengthen Broyhill's relationship
     with these retailers by assisting them in overcoming some of the
     significant difficulties in running an independent furniture business. 
     Participating retailers in the Independent Dealer Program commit to a
     minimum, pre-selected lineup of Broyhill merchandise and, in return,
     receive a detailed, step-by-step, year-round advertising and
     merchandising plan. The program includes three major sales events per
     year, monthly promotional themes and professionally prepared
     advertising and promotional materials at nominal cost in order to help
     increase consumer recognition on the local level. As part of the
     Independent Dealer Program, Broyhill offers the Broyhill Furniture
     Center Program to 443 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.

     LANE FURNITURE INDUSTRIES
      
     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 Havertys 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 485
     participating dealers.  This includes 234 dealer-owned Comfort
     Showcase Galleries established by Action Industries.  The Action
     Industries galleries average approximately 4,200 square feet of retail<PAGE>


     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 200 square feet for a cedar chest boutique to 4,000
     square feet for a Hickory Chair gallery.

     THOMASVILLE FURNITURE INDUSTRIES
      
     Thomasville products are offered at 684 independently-owned retail
     locations, including 256 Thomasville Galleries, 97 Thomasville Home
     Furnishings stores and 331 authorized dealers.  The Thomasville
     Gallery concept was initiated in 1983.  Thomasville Galleries have an
     average 7,500 square feet of retail space specifically dedicated to
     the display, promotion and sale of Thomasville products.  The first
     Thomasville Home Furnishings store opened in 1988. The typical
     Thomasville Home Furnishings store is a 15,000 square foot
     independently-owned store offering a broad range of Thomasville
     products, presented in a home-like setting by specially trained
     salespersons. 

     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 Value City 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 Better Homes
     and Gardens, People and Good Housekeeping.  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
     is developing and beginning to implement national and regional
     television advertising campaigns.

     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<PAGE>


     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.

     LANE FURNITURE INDUSTRIES
      
     Lane became a well-known brand name through The Lane Company,
     Incorporated'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 and Mark Hampton 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<PAGE>





     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 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
     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.

     Lane operates 14 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. 

     Thomasville manufactures or assembles its products at 16 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.  Ninety percent of CreativeInteriors 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<PAGE>





     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.  While the Company may be required to make
     capital investments at some of its facilities to ensure compliance,
     the Company believes that it will continue to meet all applicable
     requirements in a timely fashion and that the amount of money required
     to meet these requirements will not materially affect its financial
     condition or its results of operations.

     The Company has been identified as a potentially responsible party
     ("PRP") at a number of superfund sites. The Company believes that its
     liability with respect to most of the sites is de minimis, and the
     Company is entitled to indemnification by others with respect to
     liability at certain sites.  Management believes that any liability as
     a PRP with regard to the superfund sites will not have a material
     adverse effect on the financial condition or results of operations of
     the Company. 

     COMPETITION
     -----------
      
     The furniture manufacturing industry is highly competitive. The
     Company's products compete with products made by a number of furniture
     manufacturers, including Lifestyle Furnishings International Ltd.,
     La-Z-Boy Incorporated, Ladd Furniture, Inc., Bassett Furniture<PAGE>





     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, 1997, the Company employed approximately 20,700
     people. None of the Company's employees is represented by a union.  

     BACKLOG
     -------
      
     The combined backlog of the Company's operating companies as of
     December 31, 1997 aggregated approximately $223 million, compared to
     approximately $205 million as of December 31, 1996.
      
     Item 2.  Properties
     -------------------

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


                                                         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<PAGE>



                                                         Floor       Owned
                                     Type of             Space         or
     Division       Location         Facility          (Sq. Ft.)     Leased
     ---------      --------         --------          ---------     ------

     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

     Thomasville  Thomasville, NC   Headquarters/       256,000      Owned
                                     Showroom

     Thomasville  Thomasville, NC   Plant/Warehouse     412,000      Owned<PAGE>



                                                         Floor       Owned
                                      Type of            Space         or
     Division       Location          Facility         (Sq. Ft.)     Leased
     ---------      --------          --------         ---------     ------

     Thomasville   Thomasville, NC     Plant             240,000     Owned

     Thomasville   Thomasville, NC     Plant             325,000     Owned

     Thomasville    Thomasville, NC    Plant             309,850     Owned

     Thomasville    Lenoir, NC         Plant/Warehouse   828,000     Owned

     Thomasville    Winston-Salem, NC  Plant/Warehouse   706,000     Owned

     Thomasville    West Jefferson, NC Plant/Warehouse   223,545     Owned

     Thomasville    Johnson City, TN   Plant/Warehouse   284,120     Owned

     Thomasville    Statesville, NC    Plant             158,600     Owned

     Thomasville    Troutman, NC       Plant             238,200     Owned

     Thomasville    Conover, NC        Plant             123,200     Owned

     Thomasville    Hickory, NC        Plant              58,700     Owned

     Thomasville    Hickory, NC        Plant              98,700     Owned

     Thomasville    Thomasville, NC    Warehouse         731,000     Owned

     Thomasville    Appomattox, VA     Plant/Warehouse   804,000     Owned

     Thomasville    Carysbrook, VA     Plant             189,000     Owned

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

     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
     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 1997 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<PAGE>

     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, 1998, 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, 1996 and December 31, 1997.

     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>


                                            FIVE-YEAR CONSOLIDATED FINANCIAL REVIEW


     -------------------------------------------------------------------------------------------------------------------
     (Dollars in thousands except per share data)                       Year Ended December 31,                         
                                                 -----------------------------------------------------------------------
                                                        1997           1996           1995           1994           1993
     -------------------------------------------------------------------------------------------------------------------
     Summary of operations: 
       Net sales                                   $1,808,276     $1,696,795    $1,073,889     $1,072,696       $980,532 
       Gross profit                                   450,690        431,473       291,237        298,712        275,323 
       Interest expense                                42,747         45,217        33,845         37,886         38,621 
       Earnings before income tax expense,
         discontinued operations and 
         extraordinary item                           107,254         88,292        57,038         48,841         37,266
       Income tax expense                              40,201         34,070        22,815         20,908         15,924 
       Net earnings from continuing operations         67,053         54,222        34,223(1)      27,933         21,342 
       Discontinued operations                              -              -             -         10,339         24,026 
       Extraordinary item                                   -         (7,417)       (5,815)             -              -
       Net earnings                                $   67,053     $   46,805    $   28,408     $   38,272       $ 45,368 

       Per share of common stock - diluted:
         Net earnings from continuing operations   $     1.15     $     0.88    $     0.67(1)  $     0.54       $   0.41 
         Discontinued operations                            -              -             -           0.20            .47 
         Extraordinary item                                 -          (0.12)        (0.11)             -              - 
         Net earnings                              $     1.15     $     0.76    $     0.56     $     0.74       $   0.88

         Weighted average common and common 
           equivalent shares outstanding -
           diluted (in thousands)                      58,473         61,946        50,639         51,495         51,375

     Other information (continuing operations):
       Working capital                             $  482,288     $  462,661    $  455,036     $  308,323       $271,588
       Property, plant and equipment, net             294,061        301,962       306,406        181,393        191,581 
       Capital expenditures                            40,004         40,344        35,616         21,108         30,197
       Total assets                                 1,257,236      1,269,204     1,291,739        881,735        858,163
       Long-term debt                                 667,800        572,600       705,040        409,679        403,255 
       Shareholders' equity                        $  323,322     $  419,657    $  301,156     $  275,394       $338,557 
     --------------------------------------------------------------------------------------------------------------------


     (1)  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 $0.58, respectively.<PAGE>

</TABLE>




     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 the following
     factors have had a significant effect on its recent financial
     statements.

          Common stock repurchase.  On June 27, 1997, the Company completed
     the repurchase of 10,842,299 shares of common stock and warrants to
     purchase 290,821 shares of common stock from Apollo Investment Fund,
     L.P. and Lion Advisors, L.P. for $170.5 million.  The Company financed
     the repurchase by amending the Secured Credit Agreement to include a
     new term loan facility of $200.0 million.

          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.

          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 1997, 1996
     and 1995.  The results for 1995 do not include any of the operations
     of Thomasville.

<TABLE>
<CAPTION>

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


     ------------------------------------------------------------------------------------------
      (Dollars in millions)                              Year Ended December 31,
                           ---------------------------------------------------------------------
                                   1997                      1996                    1995 
                          -----------------------   ---------------------    -------------------
                                         % of Net                % of Net               % of Net
                           Dollars          Sales   Dollars         Sales     Dollars      Sales
      ------------------------------------------------------------------------------------------
      Net sales           $1,808.3        100.0%    $1,696.8       100.0%    $1,073.9     100.0%
      Cost of operations   1,319.5         73.0      1,228.4        72.4        760.4      70.8 
      Selling, general and
       administrative
       expenses              286.1         15.8        283.4        16.7        198.3      18.5 
      Depreciation and
       amortization           56.0          3.1         54.1         3.2         36.1       3.3
      -----------------------------------------------------------------------------------------
      Earnings from
       operations            146.7          8.1        130.9         7.7         79.1       7.4 
      Interest expense        42.7          2.4         45.2         2.7         33.9       3.2 
      Other income, net:
       Gain on insurance
        settlement               -            -            -           -          7.9       0.7 
       Other                   3.3          0.2          2.6         0.2          3.9       0.4 
      -----------------------------------------------------------------------------------------
      Earnings before income
       tax expense and
       extraordinary item    107.3          5.9         88.3         5.2         57.0       5.3 
      Income tax expense      40.2          2.2         34.1         2.0         22.8       2.1
      -----------------------------------------------------------------------------------------
      Net earnings before
        extraordinary item $  67.1          3.7%    $   54.2         3.2%    $   34.2       3.2%
      ==========================================================================================
      Gross profit(1)      $ 450.7         24.9%    $  431.5        25.4%    $  291.2      27.1%

      (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>

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

      ------------------------------------------------------------------------------------------
      (Dollars in millions)                                        Year Ended December 31,
                                                           1997           1996          1995
      ------------------------------------------------------------------------------------------
      Net sales                                          $1,808.3       $1,696.8      $1,073.9
      Cost of operations                                  1,319.5        1,228.4         760.4
      Depreciation (associated with
        cost of goods sold)                                  38.1           36.9          22.3
      ------------------------------------------------------------------------------------------
      Gross profit                                       $  450.7       $  431.5      $  291.2 
      ==========================================================================================
</TABLE>
<TABLE>
<CAPTION>
      <S>                                              <C>

          Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

          Net sales for 1997 were $1,808.3 million compared to $1,696.8 million for 1996,
      an increase of $111.5 or 6.6%.  The improved sales performance for 1997 occurred at
      each operating company and ranged, in varying degrees, across all product lines. 
      The increase in net sales was achieved through continued introductions of new
      products, emphasis on the Company's brand names and expansion of distribution.

           Cost of operations for 1997 was $1,319.5 million compared to $1,228.4 million
      for 1996, an increase of 7.4%.  Cost of operations as a percentage of net sales
      increased from 72.4% for 1996 to 73.0% in 1997 primarily due to the negative impact
      of a manufacturing plant closing and related production realignment at Thomasville.

           Selling, general and administrative expenses increased to $286.1 million in
      1997 from  $283.4 million in 1996, an increase of 0.9%.  As a percentage of net
      sales, selling, general and administrative expenses decreased from 16.7% for 1996 to
      15.8% for 1997 reflecting the Company's ongoing implementation of cost control and
      reduction programs.

           Depreciation and amortization for 1997 was $56.0 million compared to $54.1
      million in 1996, an increase of 3.5%.  The amount of depreciation and amortization
      attributable to the "fresh-start" reporting was $16.4 million and $16.3 million in
      1997 and 1996, respectively.

           Interest expense for 1997 totaled $42.7 million compared with $45.2 million in
      1996.  The reduced interest expense reflects lower long-term debt balances during
      the first six months of the year, offset partially by additional long-term debt
      incurred at the end of the second quarter to finance the Company's repurchase of
      approximately 10.8 million shares of its common stock.

           Other income, net for 1997 totaled $3.3 million compared to $2.6 million for
      1996.  For 1997, other income consisted of interest on short-term investments of
      $0.9 million and other miscellaneous income and expense items totaling $2.4 million.

           Income tax expense for 1997 totaled $40.2 million, producing an effective tax
      rate of 37.5% compared with an effective tax rate of 38.6% for 1996.  The effective
      tax rates for both periods were adversely impacted by certain nondeductible expenses
      incurred and provisions for state and local income taxes.

           Net earnings per common share before extraordinary item on a diluted basis were
      $1.15 and $0.88 for 1997 and 1996, respectively.  Weighted average shares
      outstanding used in the calculation of net earnings per common share on a basic and
      diluted basis were 56,438,000 and 58,473,000 in 1997, respectively, and 59,172,000
      and 61,946,000 in 1996, respectively.

           Gross profit for 1997 was $450.7 million compared with $431.5 million in 1996,
      an increase of 4.5%.  The decrease in gross profit margin to 24.9% in 1997 from
      25.4% in 1996 was primarily due to the previously noted manufacturing plant closing
      and related production realignment at Thomasville.<PAGE>
</TABLE>



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

           Net sales for 1996 increased to $1,696.8 million from $1,073.9
million 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 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 before extraordinary item on a diluted 
basis were $0.88 and $0.67 for 1996 and 1995, respectively.  Net earnings per
common share before extraordinary item and gain on insurance settlement, net
of income tax expense, on a diluted basis was $0.58 for 1995.  Weighted
average shares outstanding used in the calculation of net earnings per
common share on a basic and diluted basis were 59,172,000 and 61,946,000 in
1996, respectively, and 50,114,000 and 50,639,000 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%.

      Financial Condition and Liquidity

      Liquidity

           Cash and cash equivalents at December 31, 1997 totaled $12.3 million
compared to $19.4 million at December 31, 1996.  For 1997, net cash provided by
operating activities totaled $103.7 million.  Net cash used by investing 
activities totaled $39.3 million.  Net cash used in financing activities 
totaled $71.5 million, including $173.2 million for the repurchase of common
stock and warrants, partially offset by the net addition of $95.2 million of
long-term debt and the receipt of $10.7 million from the exercise of warrants
and stock options to purchase shares of common stock.

         Working capital was $482.3 million at December 31, 1997 compared to
$462.7 million at December 31, 1996.  The current ratio was 4.5 to 1 at 
December 31, 1997 compared to 4.2 to 1 at December 31, 1996.  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, 1997, long-term debt totaled $667.8 million compared
to $572.6 million at December 31, 1996.  The increase in indebtedness was the
result of additional borrowings to finance the repurchase of approximately 
11 million shares of common stock and warrants to purchase common stock for
$170.5 million, partially offset by repayments of approximately $80.0 million
funded by cash flow from operations and warrant exercise proceeds.  The
Company's debt-to-capitalization ratio was 67.4% at December 31, 1997
compared to 57.7% at December 31, 1996.

      Financing Arrangements

         To meet short-term capital and other financial requirements, the 
Company maintains a $475.0 million revolving credit facility as part of its
Secured Credit Agreement with a group of financial institutions.  The revolving
credit facility allows for both issuance of letters of credit and cash
borrowings.  Letter of credit outstandings are limited to no more than $60.0
million.  Cash borrowings are limited only by the facility's maximum 
availability less letters of credit outstanding.  At December 31, 1997, 
there were $235.0 million of cash borrowings outstanding under
the revolving credit facility and $34.7 million in letters of credit 
outstanding, leaving an excess of $205.3 million available under the
revolving credit facility.

        On June 27, 1997, the Company completed the repurchase of 10,842,299 
shares of its common stock and warrants to purchase 290,821 shares of common
stock from Apollo Investment Fund, L.P. and Lion Advisors, L.P. for 
approximately $170.5 million.  The Company financed the repurchase by amending
its Secured Credit Agreement to include a new term loan facility of 
$200.0 million.  The term loan facility is a non-amortizing ten-year
facility, bearing interest at a base rate plus 0.75% or at an adjusted 
Eurodollar rate plus 1.75%, depending upon the type of loan the Company
executes.  Net cash proceeds received from the term loan facility in excess 
of the amount required for the stock and warrant repurchase and associated 
fees and expenses were used to reduce outstanding borrowings from the 
revolving credit facility under the Company's existing Secured Credit 
Agreement.

     The Company also maintains a Receivables Securitization Facility totaling
$225.0 million 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.

     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.

      Other

      The Company has commenced conversion of its computer programs and files in
order to function in the year 2000.  The Company believes the cost of conversion
will not be material to its results of operations and financial position.<PAGE>


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

                                   CONSOLIDATED BALANCE SHEETS


      -----------------------------------------------------------------------------------
      (Dollars in thousands)                           December 31,          December 31,
                                                              1997                  1996
      -----------------------------------------------------------------------------------
      Assets
      Current assets:
        Cash and cash equivalents                       $   12,274            $   19,365 
        Receivables, less allowances of $13,793
        ($19,124 at December 31, 1996) (Note 6)            293,975               283,417
        Inventories (Note 4)                               287,046               281,107 
        Prepaid expenses and other current assets           25,214                23,378
      -----------------------------------------------------------------------------------
          Total current assets                             618,509               607,267 
      Property, plant and equipment:
        Land                                                16,758                16,292 
        Buildings and improvements                         178,245               172,783 
        Machinery and equipment                            264,689               236,654 
      -----------------------------------------------------------------------------------
                                                           459,692               425,729 
      Less accumulated depreciation                        165,631               123,767
      ----------------------------------------------------------------------------------- 
          Net property, plant and equipment                294,061               301,962 
      Intangible assets (Note 5)                           330,549               344,101 
      Other assets                                          14,117                15,874 
      ----------------------------------------------------------------------------------
                                                        $1,257,236            $1,269,204 
      ==================================================================================

      Liabilities and Shareholders' Equity
      Current liabilities:
        Accounts payable                                $   52,141            $   61,095 
        Accrued employee compensation                       29,430                29,864 
        Accrued interest expense                             7,451                 6,579 
        Other accrued expenses                              47,199                47,068 
      ----------------------------------------------------------------------------------
          Total current liabilities                        136,221               144,606 
      Long-term debt (Note 6)                              667,800               572,600 
      Other long-term liabilities                          129,893               132,341 

      Shareholders' equity:
        Preferred stock, authorized 10,000,000 shares,
          no par value - issued, none                            -                     -
        Common stock, authorized 100,000,000 shares,
          $1.00 stated value - issued 52,003,520 and 
          61,432,181 shares at December 31, 1997 and 
          1996 (Note 7)                                     52,003                61,432 
        Paid-in capital                                    124,595               278,554 
        Retained earnings                                  146,724                79,671
      ----------------------------------------------------------------------------------
          Total shareholders' equity                       323,322               419,657
      ----------------------------------------------------------------------------------
                                                        $1,257,236            $1,269,204
      ==================================================================================


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

<PAGE>


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


                                  CONSOLIDATED STATEMENTS OF OPERATIONS


      -------------------------------------------------------------------------------------------
      (Dollars in thousands except per share data)
                                                                    Year Ended December 31,      
                                                       ------------------------------------------
                                                               1997         1996          1995
      -------------------------------------------------------------------------------------------
      Net sales                                          $1,808,276   $1,696,795    $1,073,889
      Costs and expenses:
        Cost of operations                                1,319,455    1,228,355       760,393 
        Selling, general and administrative expenses        286,086      283,432       198,321 
        Depreciation and amortization (includes
          $16,369, $16,285 and $15,922 related to
          fair value adjustments)                            55,995       54,082        36,104 
      -------------------------------------------------------------------------------------------
      Earnings from operations                              146,740      130,926        79,071 

      Interest expense                                       42,747       45,217        33,845 
      Other income, net:
        Gain on insurance settlement (Note 11)                    -            -         7,882 
        Other                                                 3,261        2,583         3,930
      -------------------------------------------------------------------------------------------
      Earnings before income tax expense
        and extraordinary item                              107,254       88,292        57,038 
      Income tax expense (Note 8)                            40,201       34,070        22,815 
      -------------------------------------------------------------------------------------------
      Net earnings before extraordinary item                 67,053       54,222        34,223 
      Extraordinary item - early extinguishment
        of debt, net of tax benefit (Note 10)                     -       (7,417)       (5,815)
      -------------------------------------------------------------------------------------------
      Net earnings                                       $   67,053   $   46,805    $   28,408 
      ===========================================================================================
      Net earnings per common share - basic (Note 2):
        Net earnings before extraordinary item           $     1.19   $     0.92    $     0.68 
        Extraordinary item - early extinguishment of debt         -        (0.13)        (0.11)
      -------------------------------------------------------------------------------------------
      Net earnings per common share - basic              $     1.19   $     0.79    $     0.57
      ===========================================================================================
      Net earnings per common share - diluted (Note 2):
        Net earnings before extraordinary item           $     1.15   $     0.88    $     0.67 
        Extraordinary item - early extinguishment of debt         -        (0.12)        (0.11)
      -------------------------------------------------------------------------------------------
      Net earnings per common share - diluted            $     1.15   $     0.76    $     0.56 
      ===========================================================================================


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

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



                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
      -------------------------------------------------------------------------------------------
      (Dollars in thousands)
                                                                 Year Ended December 31,
                                                        -----------------------------------------
                                                              1997            1996          1995
      -------------------------------------------------------------------------------------------
      Cash flows from operating activities:
        Net earnings                                      $ 67,053        $ 46,805      $ 28,408 
        Adjustments to reconcile net earnings
          to net cash provided by operating activities:
          Net loss on early extinguishment of debt               -           7,417         5,815
          Depreciation of property, plant and equipment     43,935          42,022        26,371 
          Amortization of intangible and other assets       12,060          12,060         9,733 
          Noncash interest expense                           1,297           2,042         2,150 
          (Increase) decrease in receivables               (10,558)         (7,301)          165 
          (Increase) decrease in inventories                (5,939)        (11,430)        3,340 
          Decrease in prepaid expenses and intangible
            and other assets                                 3,655          13,695         1,179 
          Increase (decrease) in accounts payable,
            accrued interest expense and other
            accrued expenses                                (7,405)         33,710        14,794 
          Decrease in net deferred tax liabilities          (8,056)         (7,972)         (211)
          Increase (decrease) in other long-term
            liabilities                                      7,669         (15,628)          246
      -------------------------------------------------------------------------------------------
        Net cash provided by operating activities          103,711         115,420        91,990
      -------------------------------------------------------------------------------------------
      Cash flows from investing activities:
        Acquisition of business (Note 3)                         -               -      (335,438)
        Proceeds from the disposal of assets                   732           2,766           519 
        Additions to property, plant and equipment         (40,004)        (40,344)      (35,616)
      -------------------------------------------------------------------------------------------
        Net cash used by investing activities              (39,272)        (37,578)     (370,535)
      -------------------------------------------------------------------------------------------
      Cash flows from financing activities:
        Payments for debt issuance costs                    (3,342)         (4,467)      (14,026)
        Additions to long-term debt                        220,000         380,000       576,000
        Payments of long-term debt                        (124,800)       (530,279)     (286,574)
        Proceeds from the sale of common stock                -             81,292             -
        Proceeds from the issuance of common stock          10,734           9,290           201
        Payment for the repurchase and retirement
          of common stock                                 (168,056)              -             -
        Payments for the repurchase of common stock
          warrants                                          (5,187)        (19,961)       (2,789)
        Payments for common stock offering expenses
          of selling shareholders                             (879)           (764)            -
      ------------------------------------------------------------------------------------------  
        Net cash provided (used) by financing activities   (71,530)        (84,889)      272,812
      ------------------------------------------------------------------------------------------
      Net decrease in cash and cash equivalents             (7,091)         (7,047)       (5,733)
      Cash and cash equivalents at beginning of period      19,365          26,412        32,145
      ------------------------------------------------------------------------------------------
      Cash and cash equivalents at end of period          $ 12,274        $ 19,365      $ 26,412
      ==========================================================================================
      Supplemental Disclosure:
        Cash payments for income taxes, net               $ 40,639        $ 33,126      $ 14,386 
      ==========================================================================================
        Cash payments for interest expense                $ 40,707        $ 37,960      $ 32,010
      ==========================================================================================

      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, 1994                        $50,076   $220,788    $  4,530      $275,394

    Net earnings                                                             28,408        28,408
    Common stock activity:
      Stock option exercises (Note 7)                     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 7)          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    278,554      79,671       419,657

    Net earnings                                                             67,053        67,053
    Common stock activity:
      Repurchase of common stock - 10,842,299 shares (10,842)  (157,214)                 (168,056)
      Stock option exercises (Note 7)                    174      1,302                     1,476
      Warrant exercises - 1,298,498 shares             1,298      7,960                     9,258
      Warrant purchases - 650,071 shares                         (5,187)                   (5,187)
      Retirement of common stock - 58,824 shares         (59)        59                       -
    Common stock offering expenses of
      selling shareholders                                         (879)                     (879)
    ---------------------------------------------------------------------------------------------
    Balance December 31, 1997                        $52,003   $124,595    $146,724      $323,322
    =============================================================================================


    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, 1997, 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.   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.  Fiscal
     year 1997 includes 53 weeks of operations, while 1996 and 1995 each
     represented 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.
     Depreciation is calculated using both accelerated and straight-line
     methods based on the estimated useful lives of the respective assets,
     which generally range from 3 to 45 years for buildings and
     improvements and from 3 to 12 years for machinery and equipment.

          Intangible Assets

          The excess of cost over net assets acquired in connection with
     the acquisition of Thomasville totaled $93,110.  This intangible asset
     is being amortized on a straight-line basis over a 40-year period.

          The Company emerged from Chapter 11 reorganization effective with
     the beginning of business on August 3, 1992.  In accordance with
     generally accepted accounting principles, the Company was required to
     adopt "fresh-start" reporting which included adjusting all assets and
     liabilities to their fair values as of the effective date.  The
     ongoing impact of the adoption of fresh-start reporting is reflected
     in the financial statements for all years presented. 

          As a result of adopting fresh-start reporting, the Company
     recorded reorganization value in excess of amounts allocable to
     identifiable assets of approximately $146,000.  This intangible asset
     is being amortized on a straight-line basis over a 20-year period.

          Also in connection with the adoption of fresh-start reporting,
     the Company recorded approximately $156,800 in fair value of
     trademarks and trade names based upon an independent appraisal.  Such
     trademarks and trade names are being amortized on a straight-line
     basis over a 40-year period.

          Long-lived assets are reviewed for impairment whenever events or
     changes in business circumstances indicate the carrying value of the
     assets may not be recoverable.  Impairment losses are recognized if
     expected future cash flows of the related assets are less than their
     carrying values.

          Fair Value of Financial Instruments

          The Company considers the carrying amounts of cash and cash
     equivalents, receivables and accounts payable to approximate fair
     value because of the short maturity of these financial instruments.

          Amounts outstanding under long-term debt agreements are
     considered to be carried on the financial statements at their
     estimated fair values because they were entered into recently and/or
     accrue interest at rates which generally fluctuate with interest rate
     trends.<PAGE>


         Interest rate swap agreements used by the Company to fix the
     interest rate on a portion of its floating rate long-term debt are
     accounted for on the accrual basis.  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 at December 31, 1997 exceed the book value by
     approximately $2.6 million.  The fair value of the interest rate swap
     agreements is based upon market quotes from the counterparties.

         Revenue Recognition

         The Company recognizes revenue when finished goods are shipped
     with appropriate provisions for returns and uncollectible accounts.

         Income Taxes

         Deferred tax assets and liabilities are recognized for the
     estimated future tax consequences attributable to differences between
     the financial statement carrying amounts of existing assets and
     liabilities and their respective tax bases.  Deferred tax assets and
     liabilities are measured using enacted tax rates in effect for the
     year in which those temporary differences are expected to be recovered
     or settled.  The effect of a change in tax rates on deferred tax
     assets and liabilities is recognized in income in the period that
     includes the enactment date.

         Net Earnings Per Common Share

         Effective December 31, 1997, the Company adopted Statement of
     Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." 
     SFAS No. 128 requires the presentation of basic and diluted net
     earnings per common share for 1997 interim and annual periods, and
     restatement of all prior periods presented.  The adoption of SFAS No.
     128 did not have a material effect on the consolidated financial
     statements.  Restated interim net earnings per common share
     information for 1997 and 1996 interim periods is contained in Note 13,
     "Quarterly Financial Information (Unaudited)."

         Stock-Based Compensation

         The Company accounts for stock-based compensation using the
     intrinsic value method prescribed in Accounting Principles Board
     Opinion No. 25, "Accounting for Stock Issued to Employees."  Had
     compensation expense been determined in accordance with Statement of
     Financial Accounting Standards No. 123 "Accounting for Stock-Based
     Compensation," net earnings and net earnings per common share would
     not materially differ from reported amounts.

         Reclassification

         Certain 1996 and 1995 amounts have been reclassified to conform to
     the 1997 presentation.

     3.   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.

     4.   Inventories

          Inventories are summarized as follows:

     ---------------------------------------------------------------------
                                                December 31,   December 31,
                                                       1997           1996
     ---------------------------------------------------------------------
     Finished products                             $118,385       $127,292
     Work-in-process                                 53,536         51,587
     Raw materials                                  115,125        102,228
     ---------------------------------------------------------------------
                                                   $287,046       $281,107
     =====================================================================

     5.   Intangible Assets

          Intangible assets include the following:

     ---------------------------------------------------------------------
                                                December 31,   December 31,
                                                       1997           1996
     ---------------------------------------------------------------------
     Intangible assets, at cost:
       Reorganization value in excess of amounts
         allocable to identifiable assets          $146,063       $146,063 
       Trademarks and trade names                   156,828        156,828 
       Excess of cost over net assets acquired       93,110         93,110
     ---------------------------------------------------------------------
                                                    396,001        396,001
     Less accumulated amortization                   65,452         51,900 
     ---------------------------------------------------------------------
                                                   $330,549       $344,101
     =====================================================================<PAGE>


     6.   Long-Term Debt

          Long-term debt consists of the following:

     ---------------------------------------------------------------------
                                                December 31,   December 31,
                                                       1997           1996
     ---------------------------------------------------------------------
     Secured credit agreement:
       Revolving credit facility                   $235,000       $359,000
       Term loan facility                           200,000            -
     Receivables securitization facility            220,000        200,000
     Other                                           12,800         13,600
     ---------------------------------------------------------------------
                                                   $667,800       $572,600
     =====================================================================


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

     Secured Credit Agreement

          The Secured Credit Agreement, amended and restated as of June 27,
     1997, consists of a revolving credit facility and a term loan
     facility.  The revolving credit facility is a five-year reducing
     revolving credit facility with an initial commitment of $475,000.  The
     revolving credit facility allows for issuance of letters of credit and
     cash borrowings.  Letter of credit outstandings are limited to no more
     than $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 revolving credit facility bear
     interest at a base rate or at an adjusted Eurodollar rate plus an
     applicable margin which varies, depending upon the type of loan the
     Company executes.  The applicable margin over the base rate and the
     Eurodollar rate is subject to adjustment based upon achieving certain
     leverage ratios.  At December 31, 1997, all loans outstanding under
     the revolving credit facility were based on the Eurodollar rate.

           At December 31, 1997, there were $235,000 of cash borrowings and
     $34,681 in letters of credit outstanding under the revolving credit
     facility, leaving an excess of $205,319 available under the facility.

           The revolving credit facility 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.

           On June 27, 1997, the Company amended the Secured Credit
     Agreement to include a new term loan facility of $200,000.  The term
     loan facility is a non-amortizing ten-year facility, bearing interest
     at a base rate plus 0.75% or at an adjusted Eurodollar rate plus
     1.75%, depending upon the type of loan the Company executes.  At
     December 31, 1997, all loans outstanding under the term loan facility
     were based on the Eurodollar rate.

          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.

     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, 1997 was
     $220,000.  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).

     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.<PAGE>


     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 February 1999, 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 counterparties; however, the Company does not
     anticipate nonperformance by the counterparties. 

     Other Information

          Maturities of long-term debt are $0, $0, $220,000, $235,000 and
     $0 for years 1998 through 2002, respectively.

     7.   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, 1997, 52,003,520
     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, 1997:

     ---------------------------------------------------------------------- 
                                                                     Number
                                                                  of Shares
     ----------------------------------------------------------------------
     Common stock options:
       Granted                                                    3,897,930
       Available for grant                                          972,306
     ----------------------------------------------------------------------
                                                                  4,870,236
     ======================================================================


          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.

          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>

     --------------------------------------------------------------------------------------------------------
                                                                  Year Ended December 31,
                                                  1997                      1996                    1995
                                      -----------------------      --------------------    ----------------------
                                                      Average                   Average                   Average
                                      Shares            Price      Shares         Price      Shares         Price
         --------------------------------------------------------------------------------------------------------

         Beginning of period       3,859,476           $ 6.63    2,498,000        $4.75    2,643,000        $4.64 
         Granted                     292,500            16.36    1,620,926         9.14      125,000         6.42 
         Exercised                  (173,964)            3.93      (85,050)        3.99      (43,000)        3.38 
         Cancelled                   (80,082)            6.62     (174,400)        4.29     (227,000)        4.68 
         --------------------------------------------------------------------------------------------------------
         End of period             3,897,930           $ 7.48    3,859,476        $6.63    2,498,000        $4.75 
         ========================================================================================================
         Exercisable at 
           end of period           1,979,287                     1,473,600                 1,346,750
         ========================================================================================================
         Weighted average fair
          value of options granted                     $ 7.54                     $4.79                     $2.94
         ========================================================================================================
</TABLE>

              The weighted average fair value of options granted is estimated
     on the date of grant using the Black-Scholes option pricing model with
     the following weighted average assumptions: risk free interest rate of
     6%; expected dividend yield of 0%; expected life of seven years and
     expected volatility of 31%.<PAGE>


          Summarized information regarding stock options outstanding and
     exercisable at December 31, 1997 follows:

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

     ------------------------------------------------------------------------------------------
                                      Outstanding                           Exercisable
                          ------------------------------------------   -------------------------
        Range of                                Average      Average                     Average
      Exercise Prices     Shares       Contractual Life        Price     Shares            Price
      ------------------------------------------------------------------------------------------
      Up to $10         2,900,430                   5.3       $ 5.55    1,838,287         $ 4.70
      $10 - $20           942,500                   7.7        12.64      141,000          11.75
      $20 - $30            55,000                   8.6        21.00          -              -
      ------------------------------------------------------------------------------------------
                        3,897,930                   5.9       $ 7.48    1,979,287         $ 5.20
      ==========================================================================================
</TABLE>

     Effective December 31, 1997, the Company adopted SFAS No. 128, "Earnings
per Share."  SFAS No. 128 requires a reconciliation of the numerator and 
denominator of the net earnings per common share calculations for all periods
presented.  The numerator for basic and diluted net earnings per common share 
is net earnings for all periods presented.  The denominator for basic and 
diluted net earnings per common share for 1997, 1996 and 1995 follows:

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

      ------------------------------------------------------------------------------------------
                                                              Year Ended December 31,
                                                        1997           1996                1995
      ------------------------------------------------------------------------------------------
      Weighted average shares used for
        basic net earnings per common share        56,438,465     59,172,153         50,114,034
      Effect of dilutive securities:
        Stock options                               1,447,624      1,052,852            524,545
        Warrants                                      587,105      1,721,448                  - 
      ------------------------------------------------------------------------------------------
      Weighted average shares used for
        diluted net earnings per common share     58,473,194      61,946,453          50,638,579
      ==========================================================================================
</TABLE>
      Excluded from the computation of diluted net earnings per common share 
were options to purchase 55,000, 250,000 and 43,000 shares at an average price
of $21.00, $14.25 and $7.37 per share during 1997, 1996 and 1995, 
respectively, and warrants to purchase 7,394,249 shares at $7.13 per share 
during 1995.  The securities were excluded from the calculation of diluted 
earnings per share because the exercise price was greater than the
average market price of the common stock.

       At December 31, 1996, the Company had outstanding approximately 2.0
million warrants to purchase common stock at $7.13 per share.  The warrants, 
which included a five-year call protection which expired on August 3, 1997, 
were redeemed on August 15, 1997.

      8.   Income Taxes
<TABLE>
<CAPTION>
      <S>                                              <C>              <C>                <C>


           Income tax expense was comprised of the following:
      ------------------------------------------------------------------------------------------
                                                              Year Ended December 31,
                                                        1997              1996              1995
      ------------------------------------------------------------------------------------------
      Current:
            Federal                                   $43,680          $40,870          $20,499
            State and local                             4,577            4,014            2,527
      ------------------------------------------------------------------------------------------
                                                       48,257           44,884           23,026
      Deferred                                         (8,056)         (10,814)            (211)
      ------------------------------------------------------------------------------------------
                                                      $40,201          $34,070          $22,815
      ==========================================================================================

           The following table reconciles the differences between the federal corporate
      statutory rate and the Company's effective income tax rate:
      ------------------------------------------------------------------------------------------
                                                              Year Ended December 31,
                                                       1997              1996              1995
      ------------------------------------------------------------------------------------------
      Federal corporate statutory rate                 35.0%            35.0%              35.0%
      State and local income taxes, net of
            federal tax benefit                         2.3              2.3                2.6 
      Amortization of excess reorganization value       2.4              2.9                4.5
      Other                                            (2.2)            (1.6)              (2.1)
      ------------------------------------------------------------------------------------------
      Effective income tax rate                        37.5%            38.6%              40.0%
      ==========================================================================================
</TABLE>

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


           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,
                                                                         1997           1996
      --------------------------------------------------------------------------------------
      Deferred tax assets:
            Expense accruals                                         $ 18,855       $ 14,251
            Valuation reserves                                          8,190          6,514
            Employee postretirement benefits other than pensions        3,648          3,318
            Inventory costs capitalized                                 3,367          2,550
            Employee pension plans                                      1,109            -
            Other                                                       2,208          1,063
      --------------------------------------------------------------------------------------
              Total gross deferred tax assets                          37,377         27,696
            Valuation allowance                                           -              -   
      --------------------------------------------------------------------------------------
              Total net deferred tax assets                            37,377         27,696
      Deferred tax liabilities:
            Fair value adjustments                                    (76,558)       (77,645)
            Depreciation                                               (5,535)        (7,158)
            Fair market value adjustments                              (4,631)           -  
            Employee pension plans                                        -             (697)
            Other                                                     (10,185)        (9,784)
      ---------------------------------------------------------------------------------------
             Total deferred tax liabilities                           (96,909)       (95,284)
      ---------------------------------------------------------------------------------------
             Net deferred tax liabilities                            $(59,532)      $(67,588)
      =======================================================================================
           The net deferred tax liabilities are included in the consolidated balance sheet as
      follows:

      ---------------------------------------------------------------------------------------
                                                                   December 31,   December 31,
                                                                          1997           1996
      ---------------------------------------------------------------------------------------
      Prepaid expenses and other current assets                       $ 19,214       $ 19,783
      Other long-term liabilities                                      (78,746)       (87,371)
      ---------------------------------------------------------------------------------------
                                                                      $(59,532)      $(67,588)
      =======================================================================================
</TABLE>

9.  Employee Benefits

    The Company sponsors or contributes to retirement plans covering 
substantially all employees.  The total cost of all plans for 1997, 1996 and 
1995 was $8,412, $9,450 and $7,070, 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.<PAGE>


     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.<PAGE>

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

      --------------------------------------------------------------------------------------
                                                                  December 31,   December 31,
                                                                         1997           1996
      --------------------------------------------------------------------------------------
      Actuarial present value of benefit obligations:
        Vested benefit obligation                                    $239,176       $230,456
                                                                     =======================
        Accumulated benefit obligation                               $246,731       $237,512
                                                                     =======================

        Projected benefit obligation                                 $273,487       $262,667
      Plan assets at fair value                                       306,797        279,054
      --------------------------------------------------------------------------------------
      Plan assets in excess of projected benefit obligation            33,310         16,387
      Unrecognized net gain                                           (33,558)       (13,975)
      Unrecognized prior service cost                                     978          1,021
      --------------------------------------------------------------------------------------
      Prepaid pension cost                                           $    730       $  3,433
      ======================================================================================

          Net periodic pension cost for 1997, 1996 and 1995 includes the following components:

      ---------------------------------------------------------------------------------------
                                                                 Year Ended December 31,
                                                          1997          1996            1995
      ---------------------------------------------------------------------------------------
      Service cost-benefits earned during the period    $  7,120      $  6,792      $  3,544 
      Interest cost on the projected benefit obligation   19,026        18,102        17,005 
      Actual return on plan assets                       (42,531)      (41,006)      (49,272)
      Net amortization and deferral                       19,628        20,366        31,566
      --------------------------------------------------------------------------------------
      Net periodic pension cost                          $ 3,243      $  4,254      $  2,843
      ======================================================================================
</TABLE>

      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 1997, 
1996 and 1995.  Measurement of the projected benefit obligation was based upon
a weighted average discount rate of 7.25% and a long-term rate of compensation 
increase of 4.5% for all years presented.

      Other Retirement Plans and Benefits

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

10.  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.

11.  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.

12.   Commitments and Contingent Liabilities

      Certain of the Company's real properties and equipment are operated 
under lease agreements.  Rental expense under operating leases totaled $15,699,
$14,758 and $12,241 for 1997, 1996 and 1995, respectively.  Annual minimum 
payments under operating leases are $11,929, $9,195, $5,925, $2,596 and $797 for
1998 through 2002, respectively.

       Prior to the distribution of the common stock of The Florsheim Shoe 
Company (a former subsidiary) to its shareholders on November 17, 1994, the 
Company had guaranteed certain of Florsheim's retail store operating leases.  
At December 31, 1997, the Company had guarantees outstanding on 71 retail 
store leases with a contingent liability totaling approximately $24,132.  
The Florsheim Shoe Company has agreed to indemnify the Company against any 
losses incurred as a result of the lease guarantees.

       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.

13.   Quarterly Financial Information (Unaudited)

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

           Following is a summary of unaudited quarterly information:   
          --------------------------------------------------------------------------------------
                                              Fourth         Third        Second         First
                                             Quarter       Quarter       Quarter       Quarter
          --------------------------------------------------------------------------------------
          Year ended December 31, 1997:
                Net sales                   $473,597        $440,666      $444,152      $449,861
                Gross profit                 116,738         107,803       112,724       113,425
                Net earnings                $ 18,865        $ 14,614      $ 16,515      $ 17,059

                Net earnings per common share:
                  Basic                     $   0.36        $   0.28      $   0.27      $   0.28
                  Diluted                   $   0.35        $   0.27      $   0.26      $   0.27

                Common stock price range:
                  High                      $     21 1/8    $     21      $     19 3/8  $     15 7/8
                  Low                       $     15 7/8    $     17 1/2  $     14 3/8  $     13 7/8
          ========================================================================================
          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:
                  Before extraordinary item   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
                  - basic:
                  Before extraordinary item $   0.28        $   0.23      $   0.19      $   0.20
                  Extraordinary item             -             (0.12)           -             - 
                  Total                     $   0.28        $   0.11      $   0.19      $   0.20

                Net earnings per common share
                  - diluted:
                  Before extraordinary item $   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                      $     14 7/8    $     14 5/8  $     12 1/8  $     10 1/8
                  Low                       $     12        $     10      $      9 1/8  $      8 3/8
          ========================================================================================
</TABLE>
       
          The Company has not paid cash dividends on its common stock
     during the three years ended December 31, 1997.  The closing market
     price of the Company's common stock on December 31, 1997 was $20.50
     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  May 6,  1998  is
     incorporated herein by reference.

     Executive Officers of the Registrant

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

                                                                         Current     Appointed
              Name                 Age        Position                   Positions   or Elected
              ----                 ---        --------                   ---------   ----------

      *Wilbert G. Holliman         60      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            70      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                 50      President and Chief Executive
                                            Officer of the Subsidiary -
                                            Action Industries, Inc.           X           1996
       
       Brent B. Kincaid            66      President and Chief Executive
                                            Officer of the Subsidiary -
                                            Broyhill Furniture Industries,
                                            Inc.                              X           1992
                                           Director                           X           1997

       Christian J. Pfaff          49      President and Chief Executive
                                            Officer of the Subsidiary -
                                            Thomasville Furniture Industries,
                                            Inc.                              X           1997
       
       David P. Howard             47      Controller                                     1990
                                           Vice-President                     X           1991
                                           Chief Financial Officer            X           1994
                                           Treasurer                          X           1996

       Lynn Chipperfield           46      General Counsel                    X           1993
                                           Vice-President and                        
                                           Secretary                          X           1996 

       Steven W. Alstadt           43      Controller                         X           1994
                                           Chief Accounting Officer           X           1994



      Retired as an officer of the Company on December 31, 1997

      Frederick B. Starr           65      President and Chief Executive
                                            Officer of the Subsidiary -
                                            Thomasville Furniture 
                                            Industries,Inc.                               1982

      Retired as an officer of the Company on February 11, 1998


       K. Scott Tyler, Jr.         58       President of the Subsidiary -
                                              The  Lane Company, Incorporated             1989
                                            Chief Executive Officer of the
                                              Subsidiary - The Lane Company,
                                              Incorporated                                1991

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

     There are no family relationships between any of the executive
     officers of the Registrant.

     The executive officers are elected at the organizational meeting of
     the Board of Directors which follows the annual meeting of
     stockholders and serve for one year and until their successors are
     elected and qualified.

     Each of the executive officers has held the same position or other 
     positions with the same employer during the past five years.

      
     Item 11.  Executive Compensation
     -----------------------------------


     The sections entitled "Executive Compensation", "Executive
     Compensation and  Stock Option Committee Report on Executive
     Compensation", "Compensation  Committee Interlocks and Insider
     Participation", "Stock Options", "Retirement  Plans", "Incentive
     Agreements" and "Performance Graph" of the  Company's Definitive Proxy
     Statement for the Annual Meeting of Stockholders on  May 6, 1998 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
     May 6, 1998, is incorporated herein by reference.




     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 May 6, 1998, 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, 1997 and 1996.

                Consolidated statements of operations for each of the
                years in the three-year period ended December 31, 1997.

                Consolidated statement of cash flows for each of the years
                in the  three-year period ended December 31, 1997.

                Consolidated statement of shareholders' equity for each of
                the years in the three-year period ended December 31, 1997.

                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;
                       September 6, 1996; and June 27, 1997, 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 June 30, 1997.)

                  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 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) Amendment No. 3, dated as of June 27, 1997, to the
                       Purchase and Contribution Agreement, dated as of
                       November 15, 1994, as amended and restated as of
                       December 29, 1995; June 27, 1996; and September 6,
                       1996 among The Lane Company, Incorporated, Action
                       Industries, Inc., Broyhill Furniture Industries,
                       Inc. and Thomasville Furniture Industries, Inc. as<PAGE>


                       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 June 30,
                       1997.)

                  4(f) Amendment No. 4 dated as of January 1, 1998, to the
                       Purchase and Contribution Agreement, dated as of
                       November 15, 1994, as amended and restated as of
                       December 29, 1995; June 27, 1996; September 6, 1996
                       and June 27, 1997 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.

                   4(g) 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(h) 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(i) 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 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(j) Amendment No. 3, dated as of June 27, 1997, to the
                         Receivables Purchase Agreement, dated as of
                         November 15, 1994, as amended and restated as of
                         December 29, 1995; June 27, 1996; and September 6,
                         1996 among INTERCO Receivables Corp. as Seller,<PAGE>


                         Atlantic Asset Securitization Corp., as Issuer,
                         and Credit Lyonnais New York Branch, as Agent for
                         the investors.  (Incorporated by reference to
                         Exhibit 4(c) to Furniture Brands International,
                         Inc.'s Quarterly Report on Form 10-Q for the
                         quarter ended June 30, 1997.)

                    4(k) Amendment No. 4 dated as of January 1, 1998 to the
                         Receivables Purchase Agreement, dated as of
                         November 15, 1994, as amended and restated as of
                         December 29, 1995; June 27, 1996; September 6,
                         1996 and June 27, 1997 among INTERCO Receivables
                         Corp. as Seller, Atlantic Asset Securitization
                         Corp., as Issuer, and Credit Lyonnais New York
                         Branch, as Agent for the investors.
      
                    4(l) 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 S-8 Registration Statement,
                         No. 333-39355.

                   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.)

                   10(c) 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(d) 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(e) First Amendment to Retirement Plan for Directors.
      
                  10(f) Furniture Brands International, Inc. Executive
                        Incentive Plan. (Incorporated by reference to
                        Exhibit 10(b) to Furniture Brands International,
                        Inc.'s Quarterly Report on Form 10-Q for the
                        quarter ended March 31, 1997.) 

                  10(g) 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(h) Thomasville Furniture Industries, Inc.
                        ExecutiveIncentive Plan (Incorporated by reference
                        to Exhibit 10(j) to Furniture Brands International,
                        Inc.'s Annual Report on Form 10-K for the year
                        ended December 31, 1996.)

                  10(i) Employment Agreement, dated as of April 29, 1997,
                        between Action Industries, Inc. and John T. Foy. 
                        (Incorporated by reference to Exhibit 10(d) to
                        Furniture Brands International Inc.'s Quarterly
                        Report on Form 10-Q for the quarter ended March 31,
                        1997.)

                 10(j)  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(k)  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(l)  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(m)  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.)<PAGE>


                  10(n) Employment Agreement, dated as of April 30, 1997
                        between the Company and Richard B. Loynd. 
                        (Incorporated by reference to Exhibit 10(c) to
                        Furniture Brands International, Inc.'s Quarterly
                        Report on form 10-Q for the quarter ended March 31,
                        1997.)

                  10(o) Employment Agreement, dated as of January 29, 1998,
                        between Thomasville Furniture Industries, Inc. and
                        Christian J. Pfaff. 

                  10(p) 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.)

                  10(q) Consulting Agreement, dated as of May 15, 1995, and
                        Addendum thereto, dated January 29, 1998, between
                        Broyhill Furniture Industries, Inc. and Brent B.
                        Kincaid.

                  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.)<PAGE>


                  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 not required to filed during the quarter ended
             December 31, 1997.

             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, 1997 and 1996     18

          Consolidated Statements of Operations for each of the years in the
          three-year period ended December 31, 1997                        19

          Consolidated Statement of Cash Flows for each of the years in the
          three-year period ended December 31, 1997                        20

          Consolidated Statement of Shareholders' Equity for each of the 
          years in the three-year period ended December 31, 1997           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>

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

                               FURNITURE BRANDS INTERNATIONAL, INC. AND SUBSIDIARIES
                                        Valuation and Qualifying Accounts




                                                          (Dollars in Thousands)                        
                                 ------------------------------------------------------------------------
                                                   Additions
                                 Balance at        Charged to       Deductions                 Balance at
                                 Beginning         Costs and           from       Acquired       End of
    Description                  of Period         Expenses          Reserves      Company       Period  
    ------------                 -----------       ----------       ----------    ---------    ----------
    Year Ended December 31, 1997
    ----------------------------
      Allowances deducted from
      receivables on balance sheet:
        Allowance for doubtful 
        accounts                  $17,054          $ 5,098          $(10,387) (a)  $   -        $11,765
        Allowance for cash 
        discounts/chargebacks       2,070              754              (796) (c)      -          2,028
                                  -------          -------          --------       --------     -------
                                  $19,124          $ 5,852          $(11,183)      $   -        $13,793
                                  =======          =======          =========      ========     =======
    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
                                 ========         =======         =========        =======      =======


    (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, 1997 and 1996, and the results of their operations and
     their cash flows for each of the years in the three-year period ended
     December 31, 1997, 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 29, 1998<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 27, 1998


          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 27,
     1998.


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


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


      Katherine Button Bell                   Director
     -----------------------
     (Katherine Button Bell)


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


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


      Brent B. Kincaid                        Director
     -----------------------
     (Brent B. Kincaid)


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


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


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


      Albert E. Suter                         Director
     ------------------------
     (Albert E. Suter)


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


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