Furniture Brands International Inc. ( FBN)

Q1 2011 Earnings Call

May 5, 2011 8:30 am ET

Executives

Ralph Scozzafava – Chairman, Chief Executive Officer

Steve Rolls – Senior Vice President, Chief Financial Officer

Frank Ward – Vice President, Treasurer

Analysts

Todd Schwartzman – Sidoti & Company

Brad Thomas – Keybanc Capital Markets

Barry Vogel – Barry Vogel & Associates

TJ McConville – Raymond James

Presentation

Operator

Good day ladies and gentlemen and welcome to the First Quarter 2011 Furniture Brands International Earnings conference call. My name is Tawanda and I will be your coordinator for today. At this time, all participants are in listen-only mode. Later we will facilitate a question and answer session. If at any time during the call you require operator assistance, please press star followed by zero and a coordinator will be happy to assist you. As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to Mr. Frank Ward, Vice President and Treasurer. Please proceed, sir.

Frank Ward

Thank you, Tawanda. Good morning everyone and thanks for joining us today. After I read the Safe Harbor statement, Steve Rolls, our Senior Vice President and Chief Financial Officer will go over the financial results of our first quarter. Ralph Scozzafava, our Chairman and Chief Executive Officer will then follow with a discussion of what we’re doing to drive our sales, control costs, and make the necessary investments in our brands.

I need to remind you that certain comments made during this call may contain forward-looking statements within the meaning of Section 21(e) of the Securities Exchange Act of 1934. Our actual results and future financial conditions may differ materially from those expressed in any such forward-looking statements as a result of many factors that may be outside of our control. Please refer to our SEC filings, including our annual report filed on Form 10-K for a complete discussion of the major risks and uncertainties that may affect our business. The forward-looking statements made today are as of the date of this call and we do not undertake any obligation to update our forward-looking statements.

If you do not have a copy of yesterday’s press release, you may obtain one along with copies of prior press releases and past SEC filings by linking through to the Investor Relations page of our website, furniturebrands.com.

I would now like to turn the call over to Steve, who will provide the highlights of our first quarter results. Steve?

Steve Rolls

Thank you, Frank. As reported in last evening’s financial results press release, total sales for the first quarter decreased 7.6% over the same period last year. On a sequential basis, sales in the first quarter increased 7.9% versus the fourth quarter of 2010. During the quarter, we saw sequential progress each month with sales comparisons to the prior year improving as the negative impact of the inclement weather was reduced.

Gross margin for the quarter was 26%, roughly flat compared to 26.2% last year. SG&A expenses totaled $79.6 million for the first quarter compared to $79.9 million last year. This is not the quarterly run rate we expect going forward. We expect SG&A will be a little higher than this level in future quarters due to expense timing of some items like advertising and people-related costs.

On the retail side of our business, the 46 Thomasville stores that we have operated for more than 15 months showed a same-store sales increase of 17% this quarter. This is the fifth straight quarter of double digit comp store growth in our own Thomasville stores. Part of this increase and the marketing spend mentioned earlier was directed to the Thomasville brand and is helping fuel the momentum of the business.

Focusing for a moment on what has been the high occupancy cost of some of these stores, we have said that as their leases expire we will evaluate our options for each store on a case-by-case basis. In most cases, we will relocate and resize these stores to achieve a more favorable cost structure. For example, during the quarter we held close-out sales in preparation for three store closings as these stores did not meet our performance criteria. One of these stores will be relocated in the Dallas market as we announced earlier. We will open an additional new Thomasville store in Chicago during the second quarter and continue to look for the right store opening opportunities throughout the remainder of the year.

Inventory at quarter end was $256 million versus 231 in the first quarter of 2010 and 250 million at year-end 2010. We expect to end this year with inventory levels flat to slightly below 2010 year-end levels. Cash at quarter end totaled $41 million and debt totaled 77, for a quarter-ending net debt balance of 36 million.

In April, we successfully refinanced our asset-based loan agreement. The renewed facility is now $250 million in size, which is adequate for both our current and expected future funding needs. It has a five-year maturity and increases our borrowing availability by $33 million versus the former facility to a total availability currently estimated at about $51.5 million. The new facility has several variable interest rate options. The option we typically choose is a LIBOR-based borrowing option which is now LIBOR plus 2.75% versus the old spread of LIBOR plus 1.5%. In addition, the pension funding covenant has been changed from a specific dollar requirement to a more flexible requirement that matches the plan’s regulatory minimum contribution amounts.

Read the rest of this transcript for free on seekingalpha.com

If you liked this article you might like

The 5 Dumbest Things on Wall Street This Week: Aug. 23

The 5 Dumbest Things on Wall Street This Week: Aug. 23

5 Dumbest Things on Wall Street

5 Dumbest Things on Wall Street

The 5 Dumbest Things on Wall Street This Week: July 26

The 5 Dumbest Things on Wall Street This Week: July 26

5 Dumbest Things on Wall Street

5 Dumbest Things on Wall Street

5 Dumbest Things on Wall Street This Week: April 5

5 Dumbest Things on Wall Street This Week: April 5