UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 001-00091
 Furniture Brands International, Inc.
  
 Delaware
(State or other jurisdiction of incorporation or organization)
    
    43-0337683
(I.R.S. Employer Identification No.)1 North Brentwood Blvd., St. Louis, Missouri
(Address of principal executive offices)
    
    63105
(Zip Code)
 
  
  þ o
  o o
  Large accelerated filer  o
    
    Accelerated filer  þ
    
    Non-accelerated filer  o
    
    Smaller reporting company  o(Do not check if a smaller reporting company)
  o  þ




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FURNITURE BRANDS INTERNATIONAL, INC.
TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Consolidated Financial Statements (unaudited):Consolidated Balance Sheets:
    
    
    3June 30, 2010December 31, 2009Consolidated Statements of Operations:
    
    
    4Three Months Ended June 30, 2010Three Months Ended June 30, 2009Six Months Ended June 30, 2010Six Months Ended June 30, 2009Consolidated Statements of Cash Flows:
    
    
    6Six Months Ended June 30, 2010Six Months Ended June 30, 2009Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    26PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 6. Exhibits
    
    
    32
   2




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##### 



PART I
 
 Item 1.
    
    Financial Statements
 FURNITURE BRANDS INTERNATIONAL, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (dollars in thousands)
 (unaudited)
 June 30,
    
    
    December 31,2010
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    102,790
    
    
    $
    83,872Receivables, less allowances of $15,680 ($26,225 at December 31, 2009)
    
    
    121,639
    
    
    
    125,513Income tax refunds receivable
    
    
    6,983
    
    
    
    58,976Inventories
    
    
    251,454
    
    
    
    226,078Prepaid expenses and other current assets
    
    
    9,476
    
    
    
    9,274Total current assets
    
    
    492,342
    
    
    
    503,713Property, plant, and equipment, net
    
    
    127,693
    
    
    
    134,352Trade names
    
    
    87,608
    
    
    
    87,608Other assets
    
    
    38,694
    
    
    
    32,432Total assets
    
    $
    746,337
    
    
    $
    758,105LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    77,000
    
    
    $
    17,000Accounts payable
    
    
    89,894
    
    
    
    83,813Accrued employee compensation
    
    
    31,138
    
    
    
    21,036Other accrued expenses
    
    
    42,203
    
    
    
    54,912Total current liabilities
    
    
    240,235
    
    
    
    176,761Long-term debt
    
    
    
    
    
    
    78,000Deferred income taxes
    
    
    25,217
    
    
    
    25,737Pension liability
    
    
    113,545
    
    
    
    135,557Other long-term liabilities
    
    
    75,209
    
    
    
    79,259Shareholders equity:Preferred
stock, 10,000,000 shares authorized, no par value  none issued
    
    
    
    
    
    
    Common stock, 200,000,000 shares authorized, $1.00 stated value 
56,482,541 shares issued at June 30, 2010 and December 31, 2009
    
    
    56,483
    
    
    
    56,483Paid-in capital
    
    
    193,403
    
    
    
    224,133Retained earnings
    
    
    275,574
    
    
    
    267,829Accumulated other comprehensive loss
    
    
    (107,261
    )
    
    
    (111,471
    )Treasury stock at cost 5,627,335 shares at June 30, 2010 and 7,797,319
shares at December 31, 2009
    
    
    (126,068
    )
    
    
    (174,183
    )Total shareholders equity
    
    
    292,131
    
    
    
    262,791Total liabilities and shareholders equity
    
    $
    746,337
    
    
    $
    758,105
  3




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##### 



FURNITURE BRANDS INTERNATIONAL, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands except per share information)
 (unaudited)
 Three Months Ended June 30,2010
    
    
    2009Net sales
    
    $
    289,463
    
    
    $
    288,263Cost of sales
    
    
    215,072
    
    
    
    226,635Gross profit
    
    
    74,391
    
    
    
    61,628Selling, general, and administrative expenses
    
    
    75,166
    
    
    
    76,015Operating loss
    
    
    (775
    )
    
    
    (14,387
    )Interest expense
    
    
    734
    
    
    
    1,512Other income, net
    
    
    462
    
    
    
    761Loss before income tax expense (benefit)
    
    
    (1,047
    )
    
    
    (15,138
    )Income tax expense (benefit)
    
    
    (5,295
    )
    
    
    855Net earnings (loss)
    
    $
    4,248
    
    
    $
    (15,993
    )Net earnings (loss) per common share  basic and diluted:
    
    $
    0.09
    
    
    $
    (0.33
    )Weighted average shares of common stock outstanding:Basic
    
    
    49,350
    
    
    
    48,282Diluted
    
    
    49,414
    
    
    
    48,282
  4




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##### 



FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share information)
(unaudited)
 Six Months Ended June 30,2010
    
    
    2009Net sales
    
    $
    611,854
    
    
    $
    645,134Cost of sales
    
    
    453,014
    
    
    
    503,165Gross profit
    
    
    158,840
    
    
    
    141,969Selling, general, and administrative expenses
    
    
    155,030
    
    
    
    159,229Operating earnings (loss)
    
    
    3,810
    
    
    
    (17,260
    )Interest expense
    
    
    1,578
    
    
    
    3,300Other income, net
    
    
    741
    
    
    
    1,687Earnings (loss) before income tax expense (benefit)
    
    
    2,973
    
    
    
    (18,873
    )Income tax expense (benefit)
    
    
    (4,772
    )
    
    
    1,296Net earnings (loss)
    
    $
    7,745
    
    
    $
    (20,169
    )Net earnings (loss) per common share  basic and diluted:
    
    $
    0.16
    
    
    $
    (0.42
    )Weighted average shares of common stock outstanding:Basic
    
    
    48,826
    
    
    
    48,301Diluted
    
    
    48,828
    
    
    
    48,301
  5




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##### 



FURNITURE BRANDS INTERNATIONAL, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 (unaudited)
 Six Months Ended June 30,2010
    
    
    2009Cash flows from operating activities:Net earnings (loss)
    
    $
    7,745
    
    
    $
    (20,169
    )Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:Depreciation and amortization
    
    
    12,025
    
    
    
    12,675Compensation expense related to stock option
grants and restricted stock awards
    
    
    893
    
    
    
    (1,414
    )Provision (benefit) for deferred income taxes
    
    
    (520
    )
    
    
    717Other, net
    
    
    (1,978
    )
    
    
    (1,639
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    3,874
    
    
    
    40,947Income tax refunds receivable
    
    
    51,993
    
    
    
    35,808Inventories
    
    
    (25,376
    )
    
    
    45,069Prepaid expenses and other assets
    
    
    (808
    )
    
    
    (2,527
    )Accounts payable and other accrued expenses
    
    
    3,472
    
    
    
    (62,771
    )Other long-term liabilities
    
    
    (5,013
    )
    
    
    (11,159
    )Net cash provided by operating activities
    
    
    46,307
    
    
    
    35,537Cash flows from investing activities:Additions to property, plant, equipment, and software
    
    
    (11,371
    )
    
    
    (6,003
    )Proceeds from the disposal of assets
    
    
    2,050
    
    
    
    2,159Net cash used in investing activities
    
    
    (9,321
    )
    
    
    (3,844
    )Cash flows from financing activities:Payments of long-term debt
    
    
    (18,000
    )
    
    
    (61,000
    )Other
    
    
    (68
    )
    
    
    (10
    )Net cash used in financing activities
    
    
    (18,068
    )
    
    
    (61,010
    )Net increase (decrease) in cash and cash equivalents
    
    
    18,918
    
    
    
    (29,317
    )Cash and cash equivalents at beginning of period
    
    
    83,872
    
    
    
    106,580Cash and cash equivalents at end of period
    
    $
    102,790
    
    
    $
    77,263Supplemental disclosure:Cash refunds for income taxes, net
    
    $
    (56,488
    )
    
    $
    (35,224
    )Cash payments for interest expense
    
    $
    1,434
    
    
    $
    3,686
  6




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##### 



FURNITURE BRANDS INTERNATIONAL, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   BASIS OF PRESENTATION
   RESTRUCTURING AND ASSET IMPAIRMENT CHARGES
   Three Months Ended June 30,

    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Restructuring charges:Contract termination costs
    
    $
    
    
    
    $
    
    
    
    $
    614
    
    
    $
    Termination benefits
    
    
    822
    
    
    
    1,912
    
    
    
    855
    
    
    
    2,330Closed store occupancy and lease costs
    
    
    988
    
    
    
    610
    
    
    
    1,920
    
    
    
    2,005Gain on the sale of assets
    
    
    
    
    
    
    (175
    )
    
    
    (928
    )
    
    
    (175
    )1,810
    
    
    
    2,347
    
    
    
    2,461
    
    
    
    4,160Impairment charges
    
    
    120
    
    
    
    
    
    
    
    187
    
    
    
    $
    1,930
    
    
    $
    2,347
    
    
    $
    2,648
    
    
    $
    4,160Statement of Operations classification:Cost of sales
    
    $
    
    
    
    $
    1,788
    
    
    $
    33
    
    
    $
    2,206Selling, general, and administrative expenses
    
    
    1,930
    
    
    
    559
    
    
    
    2,615
    
    
    
    1,954$
    1,930
    
    
    $
    2,347
    
    
    $
    2,648
    
    
    $
    4,160
  7




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##### 



Three Months Ended June 30,2010
    
    
    2009Accrual for closed store lease liabilities at beginning of period
    
    $
    24,574
    
    
    $
    26,669Charges (credit) to expense
    
    
    (336
    )
    
    
    (1,502
    )Less cash payments
    
    
    2,102
    
    
    
    3,648Accrual for closed store lease liabilities at end of period
    
    $
    22,136
    
    
    $
    21,519
    MinimumLeasePayments -Year
    
    Closed Stores2010
    
    $
    4,2232011
    
    
    7,8732012
    
    
    8,0462013
    
    
    7,9402014
    
    
    6,828thereafter
    
    
    5,111$
    40,021
  Three Months Ended June 30,2010
    
    
    2009Accrual for termination benefits at beginning of period
    
    $
    1,945
    
    
    $
    2,608Charges to expense
    
    
    822
    
    
    
    1,912Less cash payments
    
    
    1,769
    
    
    
    3,057Accrual for termination benefits at end of period
    
    $
    998
    
    
    $
    1,463
  8




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##### 



INVENTORIES
  June 30,
    
    
    December 31,2010
    
    
    2009Finished products
    
    $
    155,027
    
    
    $
    142,982Work-in-process
    
    
    16,919
    
    
    
    15,320Raw materials
    
    
    79,508
    
    
    
    67,776$
    251,454
    
    
    $
    226,078
 PROPERTY, PLANT, AND EQUIPMENT
  June 30,
    
    
    December 31,2010
    
    
    2009Land
    
    $
    11,375
    
    
    $
    11,442Buildings and improvements
    
    
    190,136
    
    
    
    190,760Machinery and equipment
    
    
    221,381
    
    
    
    251,046422,892
    
    
    
    453,248Less accumulated depreciation
    
    
    295,199
    
    
    
    318,896$
    127,693
    
    
    $
    134,352
  LONG-TERM DEBT
  June 30,
    
    
    December 31,2010
    
    
    2009Asset-based loan
    
    $
    77,000
    
    
    $
    95,000Less: current maturities
    
    
    77,000
    
    
    
    17,000Long-term debt
    
    $
    -
    
    
    $
    78,000
     9




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LIQUIDITY
     10




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##### 



EMPLOYEE BENEFITS
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Defined benefit plans
    
    $
    2,714
    
    
    $
    1,727
    
    
    $
    5,428
    
    
    $
    3,454Defined contribution
plan (401k plan) 
company
    
    
    1,691
    
    
    
    2,278
    
    
    
    3,364
    
    
    
    4,259Other
    
    
    140
    
    
    
    150
    
    
    
    270
    
    
    
    262$
    4,545
    
    
    $
    4,155
    
    
    $
    9,062
    
    
    $
    7,975
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    605
    
    
    $
    725
    
    
    $
    1,210
    
    
    $
    1,450Interest cost
    
    
    6,464
    
    
    
    6,436
    
    
    
    12,928
    
    
    
    12,872Expected return on plan assets
    
    
    (6,227
    )
    
    
    (6,538
    )
    
    
    (12,454
    )
    
    
    (13,076
    )Net amortization and deferral
    
    
    1,872
    
    
    
    1,104
    
    
    
    3,744
    
    
    
    2,208Net periodic pension expense
    
    $
    2,714
    
    
    $
    1,727
    
    
    $
    5,428
    
    
    $
    3,454
      11




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STOCK OPTIONS, RESTRICTED STOCK, AND RESTRICTED STOCK UNITS
  WeightedAverageExerciseShares
    
    
    PriceOutstanding at December 31, 2009
    
    
    3,072,717
    
    
    $
    18.06Granted
    
    
    608,720
    
    
    
    6.75Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (880,500
    )
    
    
    16.22Outstanding at June 30, 2010
    
    
    2,800,937
    
    
    $
    16.18
  Risk-free interest rate
    
    
    1.8
    %Expected dividend yield
    
    
    0
    %Expected life (in years)
    
    
    4.0Expected volatility
    
    
    91.8
    %
   WeightedAverageGrant-DateShares
    
    
    Fair ValueOutstanding at December 31, 2009
    
    
    197,553
    
    
    $
    9.48Granted
    
    
    746,875
    
    
    
    7.96Vested
    
    
    (62,021
    )
    
    
    11.08Forfeited
    
    
    (18,427
    )
    
    
    10.64Outstanding at June 30, 2010
    
    
    863,980
    
    
    $
    8.02
  12




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##### 



Units with
    
    
    Units withShare Price
    
    
    Share PriceObjective of
    
    
    Objective of$6.26
    
    
    $9.39Outstanding at December 31, 2009
    
    
    1,259,958
    
    
    
    1,259,958Granted
    
    
    
    
    
    
    30,000Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding at June 30, 2010
    
    
    1,259,958
    
    
    
    1,289,958
   Risk-free interest rate
    
    
    1.2
    %Expected dividend yield
    
    
    0.0
    %Expected volatility
    
    
    97.2
    %
  EARNINGS PER SHARE
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Weighted average
shares used for
basic earnings
(loss) per common
share
    
    
    49,350,000
    
    
    
    48,282,000
    
    
    
    48,826,000
    
    
    
    48,301,000Effect of dilutive
stock options and
restricted stock
    
    
    64,000
    
    
    
    
    
    
    
    2,000
    
    
    
    Weighted
average shares used
for diluted
earnings (loss) per
common share
    
    
    49,414,000
    
    
    
    48,282,000
    
    
    
    48,828,000
    
    
    
    48,301,000
  13




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INCOME TAXES
       OTHER LONG-TERM LIABILITIES
  14




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##### 



COMPREHENSIVE INCOME (LOSS)
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net earnings (loss)
    
    $
    4,248
    
    
    $
    (15,993
    )
    
    $
    7,745
    
    
    $
    (20,169
    )Other comprehensive income:Pension liability
    
    
    1,870
    
    
    
    1,104
    
    
    
    3,740
    
    
    
    2,208Foreign currency translation
    
    
    (310
    )
    
    
    932
    
    
    
    470
    
    
    
    2611,560
    
    
    
    2,036
    
    
    
    4,210
    
    
    
    2,469Income tax expense
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    55Other comprehensive income
    
    
    1,560
    
    
    
    2,008
    
    
    
    4,210
    
    
    
    2,414Total comprehensive income (loss)
    
    $
    5,808
    
    
    $
    (13,985
    )
    
    $
    11,955
    
    
    $
    (17,755
    )
  June 30,
    
    
    December 31,2010
    
    
    2009Pension liability
    
    $
    (108,700
    )
    
    $
    (112,440
    )Foreign currency translation
    
    
    1,439
    
    
    
    969$
    (107,261
    )
    
    $
    (111,471
    )
 CONTINGENT LIABILITIES
    15




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##### 



CHANGES IN ESTIMATE
  16




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##### 



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 Forward-Looking Statements
  Overview
             17




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##### 



Business Trends and Strategy
    §
    
    Development of a multi-stage product development process that blends the decades of
experience of our designers, merchandisers, marketers and dealers with proven consumer
research methodologies that are new to the furniture industry.§
    
    Supporting our retail partners with national advertising, innovative promotions and a
web presence that drives consumer traffic to their locations.§
    
    Reducing manufacturing costs through the implementation of lean and cellular
manufacturing methods and through strategic sourcing relationships with suppliers that
leverage the companys scale.
  18




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##### 



Results of Operations
  Three Months Ended June 30,2010
    
    
    2009% of
    
    
    
    
    
    
    % of(in millions, except per share data)
    
    Dollars
    
    
    Net Sales
    
    
    Dollars
    
    
    Net SalesNet sales
    
    $
    289.5
    
    
    
    100.0
    %
    
    $
    288.3
    
    
    
    100.0
    %Cost of sales
    
    
    215.1
    
    
    
    74.3
    
    
    
    226.7
    
    
    
    78.6Gross profit
    
    
    74.4
    
    
    
    25.7
    
    
    
    61.6
    
    
    
    21.4Selling, general, and administrative expenses
    
    
    75.2
    
    
    
    26.0
    
    
    
    76.0
    
    
    
    26.4Loss from operations
    
    
    (0.8
    )
    
    
    (0.3
    )
    
    
    (14.4
    )
    
    
    (5.0
    )Interest expense
    
    
    0.7
    
    
    
    0.2
    
    
    
    1.5
    
    
    
    0.5Other income, net
    
    
    0.5
    
    
    
    0.2
    
    
    
    0.8
    
    
    
    0.3Loss before income tax expense (benefit)
    
    
    (1.0
    )
    
    
    (0.3
    )
    
    
    (15.1
    )
    
    
    (5.2
    )Income tax expense (benefit)
    
    
    (5.3
    )
    
    
    (1.8
    )
    
    
    0.9
    
    
    
    0.3Net earnings (loss)
    
    $
    4.2
    
    
    
    1.5
    %
    
    $
    (16.0
    )
    
    
    (5.5
    )%Net earnings (loss) per common share  basic
and diluted
    
    $
    0.09
    
    
    
    
    
    
    $
    (0.33
    )Six Months Ended June 30,2010
    
    
    2009% of
    
    
    
    
    
    
    % of(in millions, except per share data)
    
    Dollars
    
    
    Net Sales
    
    
    Dollars
    
    
    Net SalesNet sales
    
    $
    611.9
    
    
    
    100.0
    %
    
    $
    645.1
    
    
    
    100.0
    %Cost of sales
    
    
    453.0
    
    
    
    74.0
    
    
    
    503.2
    
    
    
    78.0Gross profit
    
    
    158.9
    
    
    
    26.0
    
    
    
    142.0
    
    
    
    22.0Selling, general, and administrative expenses
    
    
    155.0
    
    
    
    25.3
    
    
    
    159.2
    
    
    
    24.7Earnings (loss) from operations
    
    
    3.8
    
    
    
    0.6
    
    
    
    (17.3
    )
    
    
    (2.7
    )Interest expense
    
    
    1.6
    
    
    
    0.3
    
    
    
    3.3
    
    
    
    0.5Other income, net
    
    
    0.7
    
    
    
    0.1
    
    
    
    1.7
    
    
    
    0.3Earnings (loss) before income tax expense
(benefit)
    
    
    3.0
    
    
    
    0.5
    
    
    
    (18.9
    )
    
    
    (2.9
    )Income tax expense (benefit)
    
    
    (4.8
    )
    
    
    (0.8
    )
    
    
    1.3
    
    
    
    0.2Net earnings (loss)
    
    $
    7.7
    
    
    
    1.3
    %
    
    $
    (20.2
    )
    
    
    (3.1
    )%Net earnings (loss) per common share  basic
and diluted
    
    $
    0.16
    
    
    
    
    
    
    $
    (0.42
    )
 19




---



##### 



Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009
       Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009
       20




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##### 



Retail Results of Operations
  Thomasville Stores (a)
    
    
    All Other Retail Locations (b)Three Months Ended June 30,
    
    
    Three Months Ended June 30,(Dollars in millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net sales
    
    $
    26.4
    
    
    $
    19.5
    
    
    $
    10.0
    
    
    $
    10.2Cost of sales
    
    
    14.8
    
    
    
    11.4
    
    
    
    6.4
    
    
    
    6.7Gross profit
    
    
    11.6
    
    
    
    8.2
    
    
    
    3.6
    
    
    
    3.5Selling, general and administrative
expenses  open stores
    
    
    15.8
    
    
    
    12.8
    
    
    
    5.6
    
    
    
    7.0Operating loss  open stores (c)
    
    
    (4.2
    )
    
    
    (4.6
    )
    
    
    (2.0
    )
    
    
    (3.5
    )Selling, general and administrative
expenses  closed stores
    
    
    -
    
    
    
    -
    
    
    
    1.0
    
    
    
    0.6Operating loss (c)
    
    $
    (4.2
    )
    
    $
    (4.6
    )
    
    $
    (3.0
    )
    
    $
    (4.1
    )Number of open stores and showrooms at end
of period
    
    
    52
    
    
    
    46
    
    
    
    19
    
    
    
    23Number of closed locations at end of period
    
    
    -
    
    
    
    -
    
    
    
    27
    
    
    
    26Same-store-sales (d):Percentage increase (decrease)
    
    
    21
    %
    
    
    (31
    )%
    
    
    (e
    )
    
    
    (e
    )Number of stores
    
    
    40
    
    
    
    20
 a)
    
    This supplemental data includes company-owned Thomasville retail store locations that
were open during the period.b)
    
    This supplemental data includes all company-owned retail locations other than open
Thomasville stores (all other retail locations). Selling, general and
administrative expenses  closed stores includes occupancy costs, lease termination costs,
and costs associated with closed store lease liabilities.c)
    
    Operating loss does not include our wholesale profit on the retail net sales.d)
    
    The same-store-sales percentage is based on sales from stores that have been in
operation and company-owned for at least 15 months.e)
    
    Same-store-sales information is not meaningful and is not presented for all other
retail locations because results include retail store locations of multiple brands,
including eight Drexel stores, two Lane stores, one Henredon store, one Broyhill store, and
seven designer showrooms at June 30, 2010; and it is not one of our long-term strategic
initiatives to grow company-owned retail store locations for these non-Thomasville brands.
  21




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##### 



Thomasville Stores (a)
    
    
    All Other Retail Locations (b)Six Months Ended June 30,
    
    
    Six Months Ended June 30,(Dollars in millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net sales
    
    $
    52.0
    
    
    $
    39.1
    
    
    $
    20.0
    
    
    $
    20.5Cost of sales
    
    
    29.4
    
    
    
    22.8
    
    
    
    12.4
    
    
    
    13.2Gross profit
    
    
    22.6
    
    
    
    16.3
    
    
    
    7.7
    
    
    
    7.3Selling, general and
administrative expenses  open
stores
    
    
    31.1
    
    
    
    26.5
    
    
    
    11.4
    
    
    
    14.2Operating loss  open stores (c)
    
    
    (8.5
    )
    
    
    (10.2
    )
    
    
    (3.8
    )
    
    
    (6.9
    )Selling, general and
administrative expenses  closed
stores
    
    
    -
    
    
    
    -
    
    
    
    1.9
    
    
    
    2.0Operating loss (c)
    
    $
    (8.5
    )
    
    $
    (10.2
    )
    
    $
    (5.7
    )
    
    $
    (8.9
    )Same-store-sales (d):Percentage increase (decrease)
    
    
    18
    %
    
    
    (28
    )%
    
    
    (e
    )
    
    
    (e
    )Number of stores
    
    
    40
    
    
    
    20
  22




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##### 



Financial Condition and Liquidity
 Liquidity
       23




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##### 



Financing Arrangements
  June 30,
    
    
    December 31,2010
    
    
    2009Asset-based loan
    
    $
    77.0
    
    
    $
    95.0Less: current maturities
    
    
    77.0
    
    
    
    17.0Long-term debt
    
    $
    -
    
    
    $
    78.0
         24




---



##### 



Funded Status of Qualified Defined Benefit Pension Plan
      25




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##### 



Contractual Obligations and Other Commitments
 Off-Balance Sheet Arrangements
  Critical Accounting Policies
   
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
 a)
    
    Evaluation of Disclosure Controls and ProceduresUnder the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of our disclosure controls and procedures, as such terms are defined in Rules
13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the Exchange
Act), as of June 30, 2010, the end of the period covered by this Quarterly Report on Form
10-Q.Disclosure controls and procedures are controls and procedures designed to ensure that
information required to be disclosed in our reports filed under the Exchange Act, such as
this report, is recorded, processed, summarized and reported within the time periods
specified in the SECs rules and forms. Disclosure controls are also designed to ensure that
such information is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.Based on this evaluation, management, including our Chief Executive Officer and Chief
Financial Officer, has concluded that our disclosure controls and procedures were effective
as of June 30, 2010.b)
    
    Changes in Internal Control over Financial ReportingThere have not been any changes in our internal control over financial reporting during the
quarter ended June 30, 2010, that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
 26




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##### 



PART II
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
 We describe the risk factors associated with our business below. This description includes any
material changes to and supersedes the description of the risk factors associated with our business
previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended
December 31, 2009. Additional risks and uncertainties that we are unaware of or that we currently
deem immaterial also may become important factors that affect our company. You should carefully
consider the risks described below in addition to all other information provided to you in this
document, in our Annual Report on Form 10-K for the year ended December 31, 2009, and in our
subsequent filings with the Securities and Exchange Commission. Any of the following risks could
materially and adversely affect our business, results of operations, and financial condition.
 The continued economic downturn could result in a decrease in our future sales, earnings, and
liquidity.
  Depressed market returns could have a negative impact on the return on plan assets for our
qualified pension plan, which may require significant funding.
  Loss of market share and other financial or operational difficulties due to competition would
likely result in a decrease in our sales and earnings.
  27




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##### 



An inability to forecast demand or respond to changes in consumer tastes and fashion trends in a
timely manner could result in a decrease in our future sales and earnings.
  A failure to achieve our projected mix of product sales could result in a decrease in our future
earnings.
  Business failures of large dealers, a group of customers or our own retail stores could result in a
decrease in our future sales and earnings.
  Inventory write-downs or write-offs could result in a decrease in our earnings.
  Sales distribution realignments can result in a decrease in our near-term sales and earnings.
  Manufacturing realignments and cost savings programs could result in a decrease in our near-term
earnings and liquidity.
  28




---



##### 



Reliance on offshore sourcing of our products subjects us to changes in local government
regulations and currency fluctuations which could result in a decrease in our earnings.
  Our operations depend on production facilities located outside the United States which are subject
to increased risks of disrupted production which could cause delays in shipments, loss of
customers, and decreases in sales and earnings.
  Fluctuations in the price, availability, and quality of raw materials could cause delays in
production and could increase the costs of materials which could result in a decrease in our sales
and earnings.
  We are subject to litigation, environmental regulations, and governmental matters that could
adversely impact our sales, earnings, and liquidity.
  We may not realize the anticipated benefits of mergers, acquisitions, or dispositions.
  Loss of key personnel or the inability to hire qualified personnel could adversely affect our
business.
  29




---



##### 



Impairment of our trade name intangible assets would result in a decrease in our earnings and net
worth.
  Provisions in our certificate of incorporation and our shareholders rights plan could discourage a
takeover and could result in a decrease in a potential acquirers valuation of our common stock.
  A change in control could limit the use of our net operating loss carry forwards and decrease a
potential acquirers valuation of our businesses, both of which could decrease our liquidity and
earnings.
  If we and our dealers are not able to open new stores or effectively manage the growth of these
stores, our ability to grow sales and profitability could be adversely affected.
  We may not be able to comply with our debt agreement or secure additional financing on favorable
terms to meet our future capital needs, which could significantly adversely impact our liquidity
and our business .
   30




---



##### 



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (c) Issuer Purchases of Equity Securities
  Maximum Number (orTotal Number of Shares
    
    
    Approximate Dollar Value) ofPurchased as Part of
    
    
    Shares that May Yet BeTotal Number of
    
    
    Average Price Paid
    
    
    Publicly Announced Plans
    
    
    Purchased Under the Plans orShares Purchased
    
    
    per Share (1)
    
    
    or Programs
    
    
    ProgramsApril 1 to April 30, 2010
    
    
    1,707
    
    
    6.80
    
    
    
    
    
    May 1 to May 31, 2010
    
    
    6,837
    
    
    8.25
    
    
    
    
    
    June 1 to June 30, 2010
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    8,544
    
    
    7.96
    
    
    
    
    
    
  31




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##### 



Item 6. Exhibits
 Incorporated by ReferenceFiledwithExhibit
    
    
    
    theIndex
    
    
    
    Form
    
    
    
    Filing Date
    
    ExhibitNo.
    
    Exhibit Description
    
    10-Q
    
    Form
    
    with the SEC
    
    No.3.1
    
    Restated Certificate of Incorporation of the Company, as amended
    
    
    
    10-Q
    
    May 14, 2002
    
    
    33.2
    
    By-Laws of the Company, as amended effective as of August 7, 2008
    
    
    
    8-K
    
    August 13, 2008
    
    
    3.13.3
    
    Certificate of Designation of Series B Junior Participating Preferred Stock
    
    
    
    8-K
    
    August 4, 2009
    
    
    3.14.1
    
    Amended and Restated Stockholders Rights Agreement, dated as of February 26, 2010, between the Company and American Stock Transfer and Trust Company, LLC, as Rights Agent
    
    
    
    8-K
    
    March 1, 2010
    
    
    4.110.1*
    
    Furniture Brands International, Inc. 2010 Omnibus Incentive Plan
    
    
    
    S-8
    
    May 6, 2010
    
    
    4.110.2*
    
    Form of Restricted Stock Award Agreement under 2010 Omnibus Incentive Plan
    
    
    
    8-K
    
    May 11, 2010
    
    
    10.210.3*
    
    Form of Restricted Stock Unit Agreement under 2010 Omnibus Incentive Plan
    
    
    
    8-K
    
    May 11, 2010
    
    
    10.310.4*
    
    Form of Nonqualified Stock Option Agreement under 2010 Omnibus Incentive Plan
    
    
    
    8-K
    
    May 11, 2010
    
    
    10.410.5*
    
    Form of Incentive Stock Option Agreement under 2010 Omnibus Incentive Plan
    
    
    
    8-K
    
    May 11, 2010
    
    
    10.510.6*
    
    Form of Performance Share Agreement under 2010 Omnibus Incentive Plan
    
    
    
    8-K
    
    May 11, 2010
    
    
    10.610.7*
    
    Furniture Brands International, Inc. 2010 Employee Stock Purchase Plan
    
    
    
    S-8
    
    May 6, 2010
    
    
    4.210.8
    
    Registration Rights Agreement dated May 21, 2010, between the Company and Evercore Trust Company, N.A
    
    
    
    8-K
    
    May 24, 2010
    
    
    10.131.1
    
    Certification of Chief Executive Officer of the Company, Pursuant to Rule 13a-14(a)/15d-14(a)
    
    X31.2
    
    Certification of Chief Financial Officer (Principal Financial Officer) of the Company, Pursuant to Rule 13a-14(a)/15d-14(a)
    
    X32.1
    
    Certification of Chief Executive Officer of the Company, Pursuant to 18 U.S.C. Section 1350
    
    X32.2
    
    Certification of Chief Financial Officer (Principal Financial Officer) of the Company, Pursuant to 18 U.S.C. Section 1350
    
    X
  32




---



##### 



SIGNATURE
  Furniture Brands International, Inc.(Registrant)By:
    
    /s/ Steven G. RollsSteven G. RollsChief Financial Officer(On behalf of the registrant and as Principal Financial Officer)Date: August 6, 2010
 33