##### Table of Contents



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 September 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(Do not check if a smaller reporting company)
Smaller reporting company   o  o þ




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##### 



FURNITURE BRANDS INTERNATIONAL, INC.
TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Financial Statements (unaudited):Consolidated Balance Sheets:
    
    
    3September 30, 2010December 31, 2009Consolidated Statements of Operations:
    
    
    4Three Months Ended September 30, 2010Three Months Ended September 30, 2009Nine Months Ended September 30, 2010Nine Months Ended September 30, 2009Consolidated Statements of Cash Flows:
    
    
    6Nine Months Ended September 30, 2010Nine Months Ended September 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 5. Other Information
    
    
    31Item 6. Exhibits
    
    
    31EX-10.4EX-10.5EX-31.1EX-31.2EX-32.1EX-32.2
   2




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PART I
 
 Item 1. Financial Statements
 
 FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
 September 30,
    
    
    December 31,2010
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    70,189
    
    
    $
    83,872Receivables, less allowances of $14,761 ($26,225 at December 31, 2009)
    
    
    118,306
    
    
    
    125,513Income tax refunds receivable
    
    
    6,983
    
    
    
    58,976Inventories
    
    
    276,471
    
    
    
    226,078Prepaid expenses and other current assets
    
    
    11,940
    
    
    
    9,274Total current assets
    
    
    483,889
    
    
    
    503,713Property, plant, and equipment, net
    
    
    126,049
    
    
    
    134,352Trade names
    
    
    87,608
    
    
    
    87,608Other assets
    
    
    37,366
    
    
    
    32,432Total assets
    
    $
    734,912
    
    
    $
    758,105LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    17,000Accounts payable
    
    
    98,667
    
    
    
    83,813Accrued employee compensation
    
    
    18,278
    
    
    
    21,036Other accrued expenses
    
    
    39,487
    
    
    
    54,912Total current liabilities
    
    
    156,432
    
    
    
    176,761Long-term debt
    
    
    77,000
    
    
    
    78,000Deferred income taxes
    
    
    23,008
    
    
    
    25,737Pension liability
    
    
    91,382
    
    
    
    135,557Other long-term liabilities
    
    
    72,297
    
    
    
    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 
60,614,741 shares issued at September 30, 2010 and 56,482,541 shares
issued December 31, 2009
    
    
    60,615
    
    
    
    56,483Paid-in capital
    
    
    210,728
    
    
    
    224,133Retained earnings
    
    
    273,480
    
    
    
    267,829Accumulated other comprehensive loss
    
    
    (104,419
    )
    
    
    (111,471
    )Treasury stock at cost 5,606,943 shares at September 30, 2010 and
7,797,319 shares at December 31, 2009
    
    
    (125,611
    )
    
    
    (174,183
    )Total shareholders equity
    
    
    314,793
    
    
    
    262,791Total liabilities and shareholders equity
    
    $
    734,912
    
    
    $
    758,105
  3




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FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share information)
(unaudited)
 Three Months EndedSeptember 30,2010
    
    
    2009Net sales
    
    $
    271,987
    
    
    $
    293,662Cost of sales
    
    
    204,592
    
    
    
    225,920Gross profit
    
    
    67,395
    
    
    
    67,742Selling, general, and administrative expenses
    
    
    70,721
    
    
    
    89,172Operating loss
    
    
    (3,326
    )
    
    
    (21,430
    )Interest expense
    
    
    789
    
    
    
    1,036Other expense, net
    
    
    395
    
    
    
    190Loss before income tax expense (benefit)
    
    
    (4,510
    )
    
    
    (22,656
    )Income tax expense (benefit)
    
    
    (2,416
    )
    
    
    880Net loss
    
    $
    (2,094
    )
    
    $
    (23,536
    )Net loss per common share  basic and diluted:
    
    $
    (0.04
    )
    
    $
    (0.49
    )Weighted average shares of common stock outstanding:Basic
    
    
    51,927
    
    
    
    48,288Diluted
    
    
    51,927
    
    
    
    48,288
  4




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FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share information)
(unaudited)
 Nine Months EndedSeptember 30,2010
    
    
    2009Net sales
    
    $
    883,841
    
    
    $
    938,796Cost of sales
    
    
    657,606
    
    
    
    729,085Gross profit
    
    
    226,235
    
    
    
    209,711Selling, general, and administrative expenses
    
    
    225,751
    
    
    
    248,401Operating earnings (loss)
    
    
    484
    
    
    
    (38,690
    )Interest expense
    
    
    2,367
    
    
    
    4,336Other income, net
    
    
    346
    
    
    
    1,497Loss before income tax expense (benefit)
    
    
    (1,537
    )
    
    
    (41,529
    )Income tax expense (benefit)
    
    
    (7,188
    )
    
    
    2,176Net earnings (loss)
    
    $
    5,651
    
    
    $
    (43,705
    )Net earnings (loss) per common share  basic and diluted:
    
    $
    0.11
    
    
    $
    (0.90
    )Weighted average shares of common stock outstanding:Basic
    
    
    49,871
    
    
    
    48,296Diluted
    
    
    49,887
    
    
    
    48,296
  5




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FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Nine Months Ended 
September 30,2010
    
    
    2009Cash flows from operating activities:Net earnings (loss)
    
    $
    5,651
    
    
    $
    (43,705
    )Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:Depreciation and amortization
    
    
    17,540
    
    
    
    18,311Compensation expense related to stock option
grants and restricted stock awards
    
    
    1,816
    
    
    
    (971
    )Provision (benefit) for deferred income taxes
    
    
    (3,018
    )
    
    
    892Other, net
    
    
    (591
    )
    
    
    (317
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    7,206
    
    
    
    45,727Income tax refunds receivable
    
    
    51,993
    
    
    
    35,808Inventories
    
    
    (50,392
    )
    
    
    70,100Prepaid expenses and other assets
    
    
    (2,006
    )
    
    
    (228
    )Accounts payable and other accrued expenses
    
    
    (3,040
    )
    
    
    (55,940
    )Other long-term liabilities
    
    
    (6,922
    )
    
    
    (7,852
    )Net cash provided by operating activities
    
    
    18,237
    
    
    
    61,825Cash flows from investing activities:Additions to property, plant, equipment, and software
    
    
    (16,190
    )
    
    
    (7,846
    )Proceeds from the disposal of assets
    
    
    2,338
    
    
    
    3,941Net cash used in investing activities
    
    
    (13,852
    )
    
    
    (3,905
    )Cash flows from financing activities:Payments of long-term debt
    
    
    (18,000
    )
    
    
    (88,000
    )Other
    
    
    (68
    )
    
    
    (10
    )Net cash used in financing activities
    
    
    (18,068
    )
    
    
    (88,010
    )Net decrease in cash and cash equivalents
    
    
    (13,683
    )
    
    
    (30,090
    )Cash and cash equivalents at beginning of period
    
    
    83,872
    
    
    
    106,580Cash and cash equivalents at end of period
    
    $
    70,189
    
    
    $
    76,490Supplemental disclosure:Cash refunds for income taxes, net
    
    $
    (56,561
    )
    
    $
    (35,088
    )Cash payments for interest expense
    
    $
    2,177
    
    
    $
    4,500
  6




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FURNITURE BRANDS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    BASIS OF PRESENTATION
   2.
    
    RESTRUCTURING AND ASSET IMPAIRMENT CHARGES
   Three Months Ended 
September 30,
    
    
    Nine Months Ended 
September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Restructuring charges:Contract termination costs (credit)
    
    $
    (614
    )
    
    $
    
    
    
    $
    
    
    
    $
    Termination benefits
    
    
    194
    
    
    
    1,912
    
    
    
    1,049
    
    
    
    4,242Closed store occupancy and lease costs
    
    
    1,610
    
    
    
    3,278
    
    
    
    3,530
    
    
    
    5,283Gain on the sale of assets
    
    
    
    
    
    
    (208
    )
    
    
    (928
    )
    
    
    (383
    )1,190
    
    
    
    4,982
    
    
    
    3,651
    
    
    
    9,142Impairment charges
    
    
    1,847
    
    
    
    628
    
    
    
    2,034
    
    
    
    628$
    3,037
    
    
    $
    5,610
    
    
    $
    5,685
    
    
    $
    9,770Statement of Operations classification:Cost of sales
    
    $
    175
    
    
    $
    1,326
    
    
    $
    208
    
    
    $
    3,532Selling, general, and administrative expenses
    
    
    2,862
    
    
    
    4,284
    
    
    
    5,477
    
    
    
    6,238$
    3,037
    
    
    $
    5,610
    
    
    $
    5,685
    
    
    $
    9,770
  7




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Three Months Ended September 30,2010
    
    
    2009Accrual for closed store lease liabilities at beginning of period
    
    $
    22,136
    
    
    $
    21,519Charges to expense
    
    
    257
    
    
    
    1,645Less cash payments
    
    
    1,481
    
    
    
    1,753Accrual for closed store lease liabilities at end of period
    
    $
    20,912
    
    
    $
    21,411
   MinimumLeasePayments -Year
    
    Closed Stores2010
    
    $
    1,9692011
    
    
    7,8732012
    
    
    8,0462013
    
    
    7,9402014
    
    
    6,828thereafter
    
    
    5,111$
    37,767
  Three Months Ended September 30,2010
    
    
    2009Accrual for termination benefits at beginning of period
    
    $
    998
    
    
    $
    1,463Charges to expense
    
    
    194
    
    
    
    1,912Less cash payments
    
    
    822
    
    
    
    1,305Accrual for termination benefits at end of period
    
    $
    370
    
    
    $
    2,070
  8




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3.
    
    INVENTORIES
  September 30,
    
    
    December 31,2010
    
    
    2009Finished products
    
    $
    176,055
    
    
    $
    142,982Work-in-process
    
    
    17,514
    
    
    
    15,320Raw materials
    
    
    82,902
    
    
    
    67,776$
    276,471
    
    
    $
    226,078
 4.
    
    PROPERTY, PLANT, AND EQUIPMENT
  September 30,
    
    
    December 31,2010
    
    
    2009Land
    
    $
    11,375
    
    
    $
    11,442Buildings and improvements
    
    
    191,275
    
    
    
    190,760Machinery and equipment
    
    
    219,510
    
    
    
    251,046422,160
    
    
    
    453,248Less accumulated depreciation
    
    
    296,111
    
    
    
    318,896$
    126,049
    
    
    $
    134,352
  5.
    
    LONG-TERM DEBT
  September 30,
    
    
    December 31,2010
    
    
    2009Asset-based loan
    
    $
    77,000
    
    
    $
    95,000Less: current maturities
    
    
    
    
    
    
    17,000Long-term debt
    
    $
    77,000
    
    
    $
    78,000
     9




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6.
    
    LIQUIDITY
     10




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7.
    
    EMPLOYEE BENEFITS
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Defined benefit plans
    
    $
    2,714
    
    
    $
    1,743
    
    
    $
    8,142
    
    
    $
    5,197Defined contribution
plan (401k plan) 
company match
    
    
    1,550
    
    
    
    1,363
    
    
    
    4,914
    
    
    
    5,622Other
    
    
    174
    
    
    
    85
    
    
    
    444
    
    
    
    347$
    4,438
    
    
    $
    3,191
    
    
    $
    13,500
    
    
    $
    11,166
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    605
    
    
    $
    282
    
    
    $
    1,815
    
    
    $
    1,732Interest cost
    
    
    6,464
    
    
    
    6,582
    
    
    
    19,392
    
    
    
    19,454Expected return on plan assets
    
    
    (6,227
    )
    
    
    (6,529
    )
    
    
    (18,681
    )
    
    
    (19,605
    )Net amortization and deferral
    
    
    1,872
    
    
    
    1,408
    
    
    
    5,616
    
    
    
    3,616Net periodic pension expense
    
    $
    2,714
    
    
    $
    1,743
    
    
    $
    8,142
    
    
    $
    5,197
      11




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8.
    
    STOCK OPTIONS, RESTRICTED STOCK, AND RESTRICTED STOCK UNITS
  WeightedAverageExerciseShares
    
    
    PriceOutstanding at December 31, 2009
    
    
    3,072,717
    
    
    $
    18.06Granted
    
    
    623,720
    
    
    
    6.72Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (949,875
    )
    
    
    16.64Outstanding at September 30, 2010
    
    
    2,746,562
    
    
    $
    15.98
  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
    
    
    767,267
    
    
    
    7.91Vested
    
    
    (63,931
    )
    
    
    11.06Forfeited
    
    
    (18,427
    )
    
    
    10.64Outstanding at September 30, 2010
    
    
    882,462
    
    
    $
    7.97
  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 September 30, 2010
    
    
    1,259,958
    
    
    
    1,289,958
   Risk-free interest rate
    
    
    0.8
    %Expected dividend yield
    
    
    0.0
    %Expected volatility
    
    
    101.9
    %
  9.
    
    EARNINGS PER SHARE
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Weighted average
shares used for
basic earnings
(loss) per common
share
    
    
    51,926,978
    
    
    
    48,288,495
    
    
    
    49,871,294
    
    
    
    48,295,685Effect of dilutive
stock options and
restricted stock
    
    
    
    
    
    
    
    
    
    
    16,096
    
    
    
    Weighted
average shares used
for diluted
earnings (loss) per
common share
    
    
    51,926,978
    
    
    
    48,288,495
    
    
    
    49,887,390
    
    
    
    48,295,685
  13




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10.
    
    INCOME TAXES
      11.
    
    OTHER LONG-TERM LIABILITIES
  14




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12.
    
    COMPREHENSIVE INCOME (LOSS)
  Three Months Ended
 September 30,
    
    
    Nine Months Ended 
September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net earnings (loss)
    
    $
    (2,094
    )
    
    $
    (23,536
    )
    
    $
    5,651
    
    
    $
    (43,705
    )Other comprehensive income:Pension liability
    
    
    1,870
    
    
    
    (2,466
    )
    
    
    5,610
    
    
    
    (258
    )Foreign currency translation
    
    
    972
    
    
    
    1,146
    
    
    
    1,442
    
    
    
    1,4072,842
    
    
    
    (1,320
    )
    
    
    7,052
    
    
    
    1,149Income tax expense (benefit)
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    48Other comprehensive income
    
    
    2,842
    
    
    
    (1,313
    )
    
    
    7,052
    
    
    
    1,101Total comprehensive income (loss)
    
    $
    748
    
    
    $
    (24,849
    )
    
    $
    12,703
    
    
    $
    (42,604
    )
  September 30,
    
    
    December 31,2010
    
    
    2009Pension liability
    
    $
    (106,830
    )
    
    $
    (112,440
    )Foreign currency translation
    
    
    2,411
    
    
    
    969$
    (104,419
    )
    
    $
    (111,471
    )
 13.
    
    CONTINGENT LIABILITIES
    15




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14.
    
    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
    
    
    Broyhill has collections of mid-priced furniture, including both wood furniture and
upholstered products, in a wide range of styles and product categories including bedroom,
dining room, living room, occasional, youth, home office, and home entertainment.
    
    Lane focuses primarily on mid-priced upholstered furniture, including motion and stationary
furniture with an emphasis on home entertainment and family rooms.
    
    Thomasville has both wood furniture and upholstered products in the mid- to upper-price
ranges and also manufactures and markets promotional-priced case goods and ready-to-assemble
furniture.
    
    Drexel Heritage markets both casegoods and upholstered furniture under the brand names
Drexel and Heritage in categories ranging from mid- to premium-priced.
    
    Henredon specializes in both wood furniture and upholstered products in the premium-price
category.
    
    Hickory Chair manufactures a premium-priced brand of wood and upholstered furniture,
offering traditional and modern styles.
    
    Pearson offers contemporary and traditional styles of finely tailored upholstered furniture
in the premium-price category.
    
    Laneventure markets a premium-priced outdoor line of wicker, rattan, bamboo, exposed
aluminum, and teak furniture.
    
    Maitland-Smith designs and manufactures premium hand crafted, antique-inspired furniture,
accessories, and lighting, utilizing a wide range of unique materials. Maitland-Smith markets
under both the Maitland-Smith and LaBarge brand names.
 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 September 30,2010
    
    
    2009% of
    
    
    
    
    
    
    % of(in millions, except per share data)
    
    Dollars
    
    
    Net Sales
    
    
    Dollars
    
    
    Net SalesNet sales
    
    $
    272.0
    
    
    
    100.0
    %
    
    $
    293.7
    
    
    
    100.0
    %Cost of sales
    
    
    204.6
    
    
    
    75.2
    
    
    
    225.9
    
    
    
    76.9Gross profit
    
    
    67.4
    
    
    
    24.8
    
    
    
    67.7
    
    
    
    23.1Selling, general, and administrative expenses
    
    
    70.7
    
    
    
    26.0
    
    
    
    89.2
    
    
    
    30.4Loss from operations
    
    
    (3.3
    )
    
    
    (1.2
    )
    
    
    (21.4
    )
    
    
    (7.3
    )Interest expense
    
    
    0.8
    
    
    
    0.3
    
    
    
    1.0
    
    
    
    0.4Other expense, net
    
    
    0.4
    
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.1Loss before income tax expense (benefit)
    
    
    (4.5
    )
    
    
    (1.7
    )
    
    
    (22.7
    )
    
    
    (7.7
    )Income tax expense (benefit)
    
    
    (2.4
    )
    
    
    (0.9
    )
    
    
    0.9
    
    
    
    0.3Net loss
    
    $
    (2.1
    )
    
    
    (0.8)
    %
    
    $
    (23.5
    )
    
    
    (8.0)
    %Net loss per common share  basic and diluted
    
    $
    (0.04
    )
    
    
    
    
    
    $
    (0.49
    )
 Nine Months Ended September 30,2010
    
    
    2009% of
    
    
    
    
    
    
    % of(in millions, except per share data)
    
    Dollars
    
    
    Net Sales
    
    
    Dollars
    
    
    Net SalesNet sales
    
    $
    883.8
    
    
    
    100.0
    %
    
    $
    938.8
    
    
    
    100.0
    %Cost of sales
    
    
    657.6
    
    
    
    74.4
    
    
    
    729.1
    
    
    
    77.7Gross profit
    
    
    226.2
    
    
    
    25.6
    
    
    
    209.7
    
    
    
    22.3Selling, general, and administrative expenses
    
    
    225.8
    
    
    
    25.5
    
    
    
    248.4
    
    
    
    26.5Earnings (loss) from operations
    
    
    0.5
    
    
    
    0.1
    
    
    
    (38.7
    )
    
    
    (4.1
    )Interest expense
    
    
    2.4
    
    
    
    0.3
    
    
    
    4.3
    
    
    
    0.5Other income, net
    
    
    0.3
    
    
    
    0.0
    
    
    
    1.5
    
    
    
    0.2Loss before income tax expense (benefit)
    
    
    (1.5
    )
    
    
    (0.2
    )
    
    
    (41.5
    )
    
    
    (4.4
    )Income tax expense (benefit)
    
    
    (7.2
    )
    
    
    (0.8
    )
    
    
    2.2
    
    
    
    0.2Net earnings (loss)
    
    $
    5.7
    
    
    
    0.6
    %
    
    $
    (43.7
    )
    
    
    (4.7)
    %Net earnings (loss) per common share 
basic and diluted
    
    $
    0.11
    
    
    
    
    
    
    $
    (0.90
    )
 19




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Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009
       Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009
       20




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##### Table of Contents



Retail Results of Operations
  Thomasville Stores (a)
    
    
    All Other Retail Locations (b)Three Months Ended
    
    
    Three Months EndedSeptember 30,
    
    
    September 30,(Dollars in millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net sales
    
    $
    27.0
    
    
    $
    21.2
    
    
    $
    9.9
    
    
    $
    11.6Cost of sales
    
    
    16.4
    
    
    
    12.6
    
    
    
    6.2
    
    
    
    7.7Gross profit
    
    
    10.5
    
    
    
    8.6
    
    
    
    3.8
    
    
    
    3.9Selling, general and administrative
expenses  open stores
    
    
    15.3
    
    
    
    14.2
    
    
    
    5.3
    
    
    
    6.3Operating
loss  open stores (c)
    
    
    (4.7
    )
    
    
    (5.6
    )
    
    
    (1.5
    )
    
    
    (2.4
    )Selling, general and administrative
expenses  closed stores
    
    
    -
    
    
    
    -
    
    
    
    1.6
    
    
    
    3.3Operating loss (c)
    
    $
    (4.7
    )
    
    $
    (5.6
    )
    
    $
    (3.1
    )
    
    $
    (5.7
    )Number of open stores and showrooms at end
of period
    
    
    51
    
    
    
    48
    
    
    
    19
    
    
    
    23Number of closed locations at end of period
    
    
    -
    
    
    
    -
    
    
    
    26
    
    
    
    29Same-store-sales (d):Percentage increase (decrease)
    
    
    22
    %
    
    
    (18)
    %
    
    
    (e
    )
    
    
    (e
    )Number of stores
    
    
    42
    
    
    
    23
 
 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 September 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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##### Table of Contents



Thomasville Stores (a)
    
    
    All Other Retail Locations (b)Nine Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(Dollars in millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net sales
    
    $
    79.0
    
    
    $
    60.3
    
    
    $
    30.0
    
    
    $
    32.1Cost of sales
    
    
    45.9
    
    
    
    35.3
    
    
    
    18.5
    
    
    
    20.9Gross profit
    
    
    33.1
    
    
    
    24.9
    
    
    
    11.4
    
    
    
    11.2Selling, general and
administrative expenses  open
stores
    
    
    46.4
    
    
    
    40.7
    
    
    
    16.7
    
    
    
    20.4Operating
loss  open stores (c)
    
    
    (13.3
    )
    
    
    (15.8
    )
    
    
    (5.3
    )
    
    
    (9.3
    )Selling, general and
administrative expenses  closed
stores
    
    
    -
    
    
    
    -
    
    
    
    3.5
    
    
    
    5.3Operating loss (c)
    
    $
    (13.3
    )
    
    $
    (15.8
    )
    
    $
    (8.8
    )
    
    $
    (14.5
    )Same-store-sales (d):Percentage increase (decrease)
    
    
    21
    %
    
    
    (24)
    %
    
    
    (e
    )
    
    
    (e
    )Number of stores
    
    
    42
    
    
    
    23
  22




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Financial Condition and Liquidity
 Liquidity
       23




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




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Funded Status of Qualified Defined Benefit Pension Plan
      25




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##### Table of Contents



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 September 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 September 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 September 30, 2010, that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
 26




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##### Table of Contents



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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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



Item 5. Other Information
   
 Item 6. Exhibits


Incorporated by ReferenceFiledwithExhibit
    
    
    
    theIndex
    
    
    
    Form
    
    
    
    Filing Date with the
    
    ExhibitNo.
    
    Exhibit Description
    
    10-Q
    
    Form
    
    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 5,2010
    
    
    
    8-K
    
    August 10, 2010
    
    
    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*
    
    Form of Change in
Control Agreement
effective January
1, 2011
    
    
    
    8-K
    
    August 10, 2010
    
    
    10.110.2
    
    Registration Rights
Agreement dated
September 2, 2010,
between the Company
and Evercore Trust
Company, N.A.
    
    
    
    8-K
    
    September 3, 2010
    
    
    10.110.3
    
    Waiver, dated as of
September 24, 2010,
among the Company,
Broyhill Furniture
Industries, Inc.,
HDM Furniture
Industries, Inc.,
Lane Furniture
Industries, Inc.,
and Thomasville
Furniture
Industries, Inc.,
the other Loan
Parties named
therein, the
Lenders party
thereto, and
JPMorgan Chase
Bank, N.A., as
Administrative
Agent
    
    
    
    8-K
    
    September 27, 2010
    
    
    10.110.4+
    
    Credit Agreement,
dated August 9,
2007, among the
Company, Broyhill
Furniture
Industries, Inc.,
HDM Furniture
Industries, Inc.,
Lane Furniture
Industries, Inc.,
and Thomasville
Furniture
Industries, Inc,
the Loan Parties
named therein, the
Lender Parties
thereto, and
JPMorgan Chase
Bank, N.A., as
Administrative
Agent
    
    X10.5*
    
    Deferred
Compensation Plan,
restated effective
as of January 1,
2011
    
    X31.1
    
    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
   31




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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: November 5, 2010 32